The instinct to move to cash when markets get ugly is one of the most natural impulses in investing. It also happens to be one of the most expensive ones, and Wells Fargo just published data to prove it.
The numbers behind the warning are more specific than most investors expect.
Wells Fargo Investment Institute cautions against emotional investing
Jaden Frazier, analyst at Wells Fargo Investment Institute, published a market commentary warning indicating that investors who react emotionally during periods of volatility risk missing the stock market’s strongest rebounds, according to the Institute.
“Markets are forward-looking, so rebounds can happen far quicker and more suddenly than anticipated,” Frazier wrote in the report. That single sentence is the core of the entire argument, and the data he published alongside it makes it harder to dismiss than most boilerplate stay-invested commentary.
S&P 500 data reveal surprising trend of best days for gains
The headline figure is striking. Sixty percent of the S&P 500‘s best trading days between May 1996 and April 2026 occurred during bear markets. An additional 18% took place in the early stages of new bull markets, according to GuruFocus.
That means roughly 78% of the market’s best single days happened at moments when investor sentiment was either deeply negative or just beginning to recover. An investor sitting in cash during those periods would have missed the gains entirely while bearing the cost of being wrong on timing.
Frazier’s report also showed the S&P 500 repeatedly recovering from major shocks over the past decade, including the Covid pandemic, recession fears, tariff announcements, and the current Iran conflict.
Despite repeated drawdowns tied to each of those events, the index continued trending higher over time, according to Wells Fargo.
Why the Iran conflict makes this investor advice especially timely
The Wells Fargo commentary lands at a moment when investors are navigating one of the most complex macro environments in recent memory. Oil prices have surged more than 50% since the Iran war began.
Inflation is running at 3.8%. The Federal Reserve has held rates steady, and markets have priced out cuts through at least 2027.
Those are exactly the kinds of conditions that historically push investors toward cash. The Wells Fargo data is a direct counter to that instinct, however.
The Iran conflict is already on Frazier’s list of market shocks from which the S&P 500 recovered. This suggests the firm views the current disruption as another episode in a long pattern, rather than a permanent structural break.
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Why timing the stock market is harder than it looks
The appeal of market timing is easy to understand. Avoiding the worst days while capturing the best ones sounds straightforward.
The problem is that the worst and best days tend to cluster. Missing the 10 best days in a given decade can reduce returns by more than half, a reality that makes the risk of stepping aside much higher than most investors calculate.
Frazier’s argument is not simply that volatility is temporary. It is that the recovery from volatility happens faster than most investors can react, and that the price of waiting for certainty is paid in missed returns rather than protected capital.
By the time conditions feel safe enough to reinvest, the sharpest part of the rebound has frequently already occurred, according to Wells Fargo’s Investment Institute commentary.
Key data points from Wells Fargo’s volatility and rebounds report:
- Best days concentration: 60% of the S&P 500’s best trading days from May 1996 to April 2026 occurred during bear markets; 18% occurred in the early stages of new bull markets, GuruFocus reported.
- Frazier’s quote: “Markets are forward-looking, so rebounds can happen far quicker and more suddenly than anticipated,” according to Wells Fargo.
- Recovery track record: S&P 500 recovered from COVID-19 selloff, recession fears, tariff announcements, and the Iran conflict despite repeated drawdowns tied to each event, Wells Fargo confirmed.
- Wells Fargo’s broader view: The firm continues to favor U.S. large-cap equities over fixed income; a large market pullback would likely require either cooling in the AI growth story or 10-year Treasury yields approaching 5%, according to Wells Fargo.
- Current conditions: Inflation at 3.8%; oil up more than 50% since the Iran war began; Fed holding rates steady with no cuts priced through 2027; S&P 500 up approximately 9% year to date despite those headwinds, Investing.com noted.
What Wells Fargo’s reminder to ride out volatility means for investors in 2026
The Wells Fargo commentary is not a prediction that markets will rally from here. It is a warning against letting short-term fear override long-term strategy.
The data Frazier published are backward-looking by design. They do not tell investors where the market goes next. They tell them what the cost of exiting has historically been.
That distinction matters because the instinct to protect capital during uncertainty is rational at the individual level and destructive at the portfolio level when it leads to poorly timed exits.
The current environment, with elevated inflation, high rates, and ongoing geopolitical disruption, is precisely the kind of period when Wells Fargo’s data suggests investors are most vulnerable to making that mistake.
The S&P 500 has already recovered from the April tariff shock and sits approximately 9% higher year to date, despite everything.
For investors who moved to cash in April and have not yet returned, Frazier’s report is a direct message. The cost of waiting is not theoretical. It is already visible in the returns they did not capture.
Related: JPMorgan doubles down on stock market message for 2026
