Investors will have three ideal windows to enter the stock market between now and early 2023, according to Bank of America.
The firm said similar to real life bear attacks, it's important investors stand their ground and don't panic.
"While every bear market is different, the point is that every major market downturn in the past has been followed by a recovery - and then some," BofA said.
Investors will have three ideal moments to buy stocks between now and early 2023 as the bear market decline continues, according to Bank of America.
In a Wednesday note, Head of CIO Market Strategy for Merrill and Bank of America Private Bank Joseph Quinlan said investors should do the same thing in the stock market as they would in real life if they were to encounter a bear: don't run, don't panic, and stand your ground.
"The principles hold true whether you're on a deserted road in Yellowstone National Park or standing on the floor of the New York Stock Exchange," Quinlan said.
And with a lot of bad news already priced into asset prices, buying stocks at current prices should prove to be a good long-term deal, according to Quinlan, who highlighted three ideal moments to buy over the next few months.
"We see three entry points for investors, running from June/July as the bear market matures, in [the] third and fourth quarter as 2023 earnings are reset, and early next year when the Fed tightening cycle winds down," Quinlan said. "Stand your ground means sticking to your underlying investment philosophy, being opportunistic, and taking the long view."
That means investors shouldn't be panicking and running out of the market, as missing just a few days of outsized gains could negatively impact an investors' total returns over the long-term, according to the note.
Instead, long-term investors should be looking to take advantage of the more than 20% year-to-date decline in the S&P 500.
That's because the S&P 500 has proven itself to be a "stable and predictable wealth generating machine," delivering "chunky" compounded annual returns of 11% since 1945. "Don't run from a bear, in other words," Quinlan said.
But there is one big unknown that could extend the drawdown in stock prices, and that's an economic recession. And while that's not the base case for Quinlan, the same rules for economic recessions apply to bear market sell-offs: "don't run, don't panic, and stand your ground."
"Recessions can be painful and costly in the near term, but the after effects of an economic downturn are typically salutary. Downturns rid the economy of its excesses; reallocate capital to more productive parts of the economy; and create and destroy, leaving firms stronger and more competitive, and equities poised for more upside," Quinlan said.
"While every bear market is different, the point is that every major market downturn in the past has been followed by a recovery - and then some," Quinlan said.
Whether this time will be different as the Fed raises interest rates to tame inflation remains to be seen.