[Animated glitches containing various letters flip to spell out the following financial terms]
On screen copy:
Bear Market
Business Cycle
Risks
Bull Market
Fixed Income
Inflation
Equities
Diversification
Interest Rates
Opportunities
Geopolitics
Market Catalysts
Market Decode™
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[Matthew Diczok speaking on camera throughout]
On screen copy:
Please see important information at the end of this program. Recorded on 5/20/2026.
On screen copy:
Matthew Diczok
Head of Cross-Asset Market Strategy
Chief Investment Office
Merrill and Bank of America Private Bank
There's a new Chair at the Federal Reserve, Kevin Warsh, and all eyes are on him as he steps into a challenging scene of elevated bond yields, upticking inflation, and pressure to cut interest rates.
The week Warsh was confirmed by the U.S. Senate ended with one of the main credit rating agencies downgrading U.S. sovereign debt.
On screen copy:
Treasury yields spiked Friday, May 15, 2026:
10-year near 4.6%, 30-year above 5.1%
Source: Bloomberg data as of May 20, 2026
We saw a jump in Treasurys, with the 10-year nearing 4.6% and the 30-year moving above 5.1%, as investors also reacted to hot inflation data, rising oil prices and fresh uncertainty tied to the Middle East.
So while the conversation for weeks had been over when rate cuts may come, the shift is now to whether they'll come at all, or if we may even see rate hikes. BofA Global Research has recalibrated its expectations, pushing potential rate cuts to late 2027.
On screen copy:
April 2026 Consumer Price Index: 3.8% YoY
April 2026 Producer Price Index: 6.0% YoY
That shift makes sense. Add accelerated producer prices to the inflation equation, combine them with higher energy prices, and you have knock on effects into sectors like transportation, goods and consumer expectations.
But there's another side to this story. Importantly, this inflation looks more driven by costs like energy rather than by overheated demand. And with the labor market still stable — moderate hiring, wage growth not reaccelerating, and low layoffs — inflation could start to ease over time if energy markets stabilize.
So how do investors think about navigating inflation risk?
On screen copy:
Portfolio Inflation Checklist:
Stay diversified
Favor quality bonds & consider
extending duration gradually
Use inflation-aware exposure where appropriate
Keep dry powder available
First, stay diversified. Inflation shocks don't hit every asset class or sector the same way, and concentration can make portfolio volatility worse.
On screen copy:
Portfolio inflation checklist:
Stay diversified
Favor quality bonds & consider
extending duration gradually
Use inflation-aware exposure where appropriate
Keep dry powder available
Second, for fixed-income investors, higher yields could mean bonds are potentially becoming more useful again. Rather than trying to call the exact peak in yields, consider adding duration gradually and emphasizing quality.
On screen copy:
Portfolio inflation checklist:
Stay diversified
Favor quality bonds & consider
extending duration gradually
Use inflation-aware exposure where appropriate
Keep dry powder available
Third, where appropriate, inflation-aware tools like Treasury Inflation-Protected Securities, or TIPS, can help offset some purchasing-power risk, while municipal bonds may offer attractive tax-aware income for higher-tax-bracket investors.
On screen copy:
Portfolio inflation checklist:
Stay diversified
Favor quality bonds & consider
extending duration gradually
Use inflation-aware exposure where appropriate
Keep dry powder available
And finally, keep some liquidity or dry powder. If inflation headlines create broad market pullbacks, that flexibility can help you rebalance into opportunity instead of reacting emotionally.
We believe for the Fed, the near-term path calls for more patience, with inflation remaining elevated but below the threshold to justify higher rates.
For investors, keep focused on long-term goals over short-term noise. If inflation stays sticky, higher yields support income; if it cools, today's yields may look attractive in hindsight.
Stay diversified, manage inflation risk, and use volatility to reassess—not react.
And that's the Market Decode.
On screen disclosures:
Important Disclosures
The opinions expressed are as of 5/20/2026 and are subject to change.
Past performance is no guarantee of future results.
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
Investments have varying degrees of risk. Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa. Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state. While the interest income is tax-exempt, any capital gains distributed are taxable to the investor. Income for some investors may be subject to the Federal Alternative Minimum Tax (AMT). Investments focused in a certain industry or sector may pose additional risks due to lack of diversification, industry volatility, economic turmoil, susceptibility to economic, political or regulatory risks and other sector concentration risks.
This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
This information should not be construed as investment advice and is subject to change. It is provided for informational purposes only and is not intended to be either a specific offer by Bank of America, Merrill or any affiliate to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service that may be available.
The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., ("Bank of America") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S" or "Merrill"), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp.").
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