Dealing with volatility: What you need to know now

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Timely insights to help you manage risk when markets shift.
April 1, 2020

What you need to know about the IRS tax extension

The opinions are those of the author(s) and subject to change.
To help taxpayers weather the economic impact of the coronavirus, the IRS has postponed the traditional April 15 federal income tax filing and payment deadline by three months to July 15. "During the three-month postponement, taxpayers won't be subject to interest or penalties for filing after April 15," says Mitchell Drossman, National Director of Wealth Planning Strategies for the Chief Investment Office of Merrill and Bank of America Private Bank.
A recent report by the Chief Investment Office,"Tax Alert 2020-02: Tax Payment and Filing Deadlines Postponed in Response to Pandemic," answers some key questions you may have about the extension and your personal taxes. The IRS continues to issue guidance on taxpayer relief, so please check with the IRS's Filing and Payment Deadlines Q&A site for the very latest information. As always, it's best to consult your tax advisor for guidance on what the tax extension might mean for you.

Who qualifies for the postponement?

The relief applies to any taxpayer with federal tax returns or payments usually due on April 15. That includes individuals, trusts, estates, partnerships, associations, companies and corporations. There are no limitations on the amount of tax that may be postponed, and taxpayers do not need to make a formal request in order to take advantage of the postponement.

What tax filings and payments are or aren't covered?

The provision applies to all 2019 federal income taxes and self-employment taxes. Self-employed people may also postpone paying their estimated quarterly taxes for the first quarter of 2020, normally due on April 15, until July 15. But self-employed taxpayers should keep in mind that their estimates and payments for the second quarter will still be due on the usual date of June 15.
In addition, IRS Notice 2020-20 automatically postpones the traditional April 15, 2020, deadline for filing gift and generation-skipping transfer tax returns and making payments of gift and generation-skipping transfer tax to July 15, 2020.

Does this mean more time to contribute to an IRA or Health Savings Account?

Yes, in FAQs at its Filing and Payment Deadlines Q&A site Retirement Plans Startup Costs Tax Credit on irs.gov the IRS states that the deadlines for 2019 contributions to IRAs and health savings accounts are extended from April 15 to July 15. (The IRS site cautions that the answers to its FAQs are not citable as legal authority.)

Are state and local taxes postponed as well?

"States generally follow the federal due dates, but it's best to check with your individual state," Drossman says. While many states have already announced plans to extend their filing and payment deadlines to July 15, 2020, a few have not yet announced extension plans.

Can taxpayers file for an automatic extension beyond the July 15 deadline?

Taxpayers have traditionally been able to request a 6-month tax filing extension by submitting the proper paperwork by April 15 — a move that's particularly useful for filers whose taxes are complex. However, they've still been required to pay their taxes by April 15. Under this year's tax postponement, the deadline for requesting this extension is now July 15. If the extension form is filed by July 15, 2020, taxes will be owed on July 15, 2020, and the tax filing deadline becomes Oct. 15.

Is there any reason not to take advantage of the federal extension?

If you believe you have a refund coming this year, filing your return on April 15 rather than taking the postponement could mean that you receive it sooner. Whatever your situation, it's important to speak with your tax advisor before making any decisions.
Check back for regular updates on this page, and tune in to our Daily CIO Audiocast for the latest insights on the coronavirus and the economy.
Information is as of 04/01/20.

Bank of America, Merrill, their affiliates, and advisors do not provide legal, tax, or accounting advice. Clients should consult their legal and/or tax advisors before making any financial decisions.

Opinions are those of the author(s) and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").
March 27, 2020

Can a historic stimulus package help right the economy?

The opinions are those of the author(s) and subject to change.
The president has signed a historic $2 trillion stimulus package aimed at stemming the economic impact of the coronavirus. That measure comes on the heels of the Federal Reserve (the Fed) promising to buy unlimited quantities of government debt and lend money to businesses and local governments alike. "There may not even be a word in the dictionary to adequately describe what we're going through right now, except maybe 'unprecedented,'" says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank.

What are the policies trying to achieve?

The $2 trillion U.S. fiscal stimulus aims to help keep the economy going by distributing money directly to businesses to help them avoid layoffs, and to individuals and families affected by the crisis, to enable them to keep paying for necessities. Likewise, the Fed is purchasing financial assets to help keep money flowing through the economy at a time when investors have been selling at a furious pace.
What the fiscal and monetary policies can do is to keep enough of the economy running that once we get past the shock of the virus, there's an economy to return to.
— Michelle Meyer, head of U.S. Economics, BofA Global Research
Monetary policies are already having some positive effects, Hyzy says. "Capital is flowing more freely in the bond markets, and there's better liquidity, though we still have a ways to go." Still, fiscal and economic policies, no matter how large, can't drive a recovery that first and foremost depends on signs that the health crisis is easing. "The heart of the issue continues to be the health data, and when infection rates crest," Hyzy says. "We're obviously not there yet."
According to Michelle Meyer, head of U.S. Economics, BofA Global Research, "What the fiscal and monetary policies can do is to keep enough of the economy running that once we get past the shock of the virus, there's an economy to return to."

What could happen next?

As the record 3.3 million Americans filing for unemployment benefits last week makes clear, the economic crisis is far from over, says Meyer. "Jobs data for April, which will be released in early May, could reveal 4 to 6 million Americans with lost jobs, and an unemployment rate nearing 7%," Meyer says.
Depending on when the health crisis eases, the economy could still "snap back," thanks to pent-up demand from millions of consumers currently staying home, Meyer says. "More likely, though, we'll see a long, slow, lackluster recovery with lots of bumps," she adds. "There's an important psychological element here, with people displaced from the workforce, quarantining and sheltering. It will take time for them to overcome fear and re-engage."
The three watchwords for a portfolio during times like these are growth, yield and quality.
— Michael Hartnett, Chief Investment Strategist, BofA Global Research

What can investors consider doing?

"The three watchwords for a portfolio during times like these are growth, yield and quality," says Michael Hartnett, Chief Investment Strategist, BofA Global Research. "You need exposure to growth because there's not a lot of it around right now." Promising areas may include technology, health care and consumer staples, notes Hyzy. "With U.S. Treasury rates at historic lows, investors may find potential for yield with investment-grade bonds, municipal bonds or dividend-paying stocks," he adds. Quality means exposure to stocks or bonds of companies with especially strong balance sheets.
For more insights, read "Staying the Course through Volatility: A Disciplined Financial Strategy Roadmap," from the Chief Investment Office, and listen to our latest Perspectives podcast "Coronavirus and the Markets."
Information is as of 03/27/20.

Opinions are those of the author(s) and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation.

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Stocks of small-cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal market related to taxation, legislative changes, or the rights of municipal security holders. 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.

There are special risks associated with an investment in commodities, including market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.

Dividend payments are not guaranteed, and are paid only when declared by an issuer's board of directors. The amount of a dividend payment, if any, can vary over time.
March 23, 2020

Tune in to our Podcast: "Coronavirus and the Markets"

The opinions are those of the author(s) and subject to change.
As the country and the world grapple with a still-expanding global pandemic, international economic activity has been disrupted and markets have been wildly volatile in recent weeks. While staying safe and healthy is uppermost in everyone's mind, people are also understandably concerned about the long-term effect the virus may have on the economy, markets and their own financial lives.
"One thing is clear: We are living in unprecedented times," says Candace Browning, Head of BofA Global Research. Browning hosts a new "Market Edition" of the Perspectives podcast offering insights on the critical questions investors are asking right now. Questions like: Should I pull back on stocks, or could this represent a buying opportunity? What areas of the market offer potential for growth? Will government policies help the economy?
Listen to their conversation here.
Podcast participants:
  • Candace Browning, Head of BofA Global Research
  • Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
  • Jared Woodard, Director for Global Investment Strategy, BofA Global Research

What investors can consider doing now

While no one alive has seen a situation quite like the mass global shutdowns spurred by the coronavirus, history does speak to the importance of staying invested through severe market turbulence, says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank. "We know that the best days often follow the worst."
That said, Hyzy adds, "Diversification can show some of its greatest benefits in the most difficult times. It's important to have a disciplined plan and rebalance periodically as capital market activity continues to unfold."
"If history is any guide, this is a moment to hold on," agrees Jared Woodard, Director for Global Investment Strategy, BofA Global Research, and co-author of the new BofA Global Research report "The Rational Investor's Guide to Coronavirus." "If I could give some non-market advice," he adds, "just take care of each other."
Information is as of 03/23/20.

Opinions are those of the authors and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation.

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
March 18, 2020

What will it take to stem the volatility?

The opinions are those of the author(s) and subject to change.
Investors should expect sharp ups and downs in the markets until coordinated health policies begin to turn the tide on the coronavirus, says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Whereas other financial crises have been addressed by fiscal and monetary policy alone, "this time, investor confidence depends first on answers to biological questions, such as how deep the health crisis will become and when the virus will be contained," Hyzy says.
A new Chief Investment Office report, "The Process Begins," suggests that coordinated health, fiscal and monetary policies in the United States and globally will be needed so that markets and the economy can find a firm floor on which to build a recovery.

Where do things stand now?

The "bottoming out" process will likely involve two phases, Hyzy suggests: First, when markets gain confidence that policies are working. Second, when they start to assess the impact on corporate earnings and the economy.
One bright spot: compared with the financial crisis of 2008, the U.S. economy was in a stronger position when the virus outbreak occurred. "In 2008, there were much more daunting questions encircling the financial system, and the consumer was not on solid footing," Hyzy says.
Yet given the many unknowns and the magnitude of the challenge, with S&P 500 asset values down 30% so far, these questions may take weeks or even months to resolve, Hyzy says. And financial estimates are likely to change frequently as the crisis evolves.

How are policymakers responding?

One of the biggest challenges for health officials right now is learning the effect that "social distancing" and other containment policies currently being enacted state by state and locality by locality are having in slowing the spread of the virus, Hyzy says. Better data and more coordinated policies will help from both a health and economic perspective, he believes. "Knowing how long people will have to stay home will help determine how consumers and businesses will manage through the crisis as well as the depth of any economic contraction."
Clearer health information can in turn help sharpen fiscal policies (such as government spending or tax relief) and monetary policies (such as the Federal Reserve's interest rate cuts and lending programs) aimed at stimulating the economy, Hyzy believes. "This is already happening, but more is needed."

What can investors consider doing?

Such conditions call for patience and avoiding giving in to panic. "We believe long-term investors should consider rebalancing their portfolios back to stay in line with their underlying strategies," Hyzy says.
Current conditions favor high-quality investments across and within asset classes, including large U.S. companies whose dividends may help compensate for the reduced income potential of bonds, Hyzy notes. Bonds remain important to help mitigate risk in a portfolio. He adds, "Maintaining a well-diversified portfolio while rebalancing over time is vital to investing towards your goals."
For more information on the coronavirus and the markets, read the Chief Investment Office's latest "Investment Insights" report, "The Process Begins."
Information is as of 03/18/20.

Opinions are those of the author(s) and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Dividend payments are not guaranteed, and are paid only when declared by an issuer’s board of directors. The amount of a dividend payment, if any, can vary over time..

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
March 16, 2020

Will the Federal Reserve's latest move be enough to calm investors?

The opinions are those of the author(s) and subject to change.
The Federal Reserve (Fed) lowered its benchmark interest rate nearly to zero on Sunday. It was the second emergency rate cut in two weeks and the latest evidence of the serious threat that policymakers believe the coronavirus poses to the economy and markets.
Investors should expect these extremely low interest rates to persist even after the economy starts to improve, says Michelle Meyer, head of U.S. Economics, BofA Global Research. "The Fed is not just cutting in the face of this shock, with a quick reversal thereafter," believes Meyer.
We think the proper policy response will require coordinated and forceful action from all branches of government.
— Mark Cabana, head of U.S. Interest Rate Strategy, BofA Global Research
Also on Sunday, the Fed announced that it will begin a new round of "quantitative easing" by purchasing $700 billion in United States Treasurys and mortgage-backed securities over the coming months. Quantitative easing was one of the primary responses the Fed used to help stimulate the economy during the financial crisis of 2008.

What do these steps mean?

The Fed's actions are a positive step, but just the start of what's needed to calm markets, says Mark Cabana, head of U.S. Interest Rate Strategy, BofA Global Research. "We think the proper policy response will require coordinated and forceful action from all branches of government." At the same time, he cautions that further policy responses, while necessary, may not be able to prevent the economy and markets from weakening further as businesses shutter their doors and families self-quarantine.

What can investors consider doing?

How the markets respond moving forward "is subject to further policy responses," notes Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "The best course for these unsettling times is to remain focused on your long-term goals and on diversification across and within asset classes. Avoid panic selling," he says. Though extremely low interest rates reduce the income potential of bonds, they remain an important part of a portfolio, mainly as a way to mitigate risk, he notes.
As for stocks, history shows that even through difficult times markets and the economy eventually do improve, Hyzy adds. Selling investments out of fear right now could potentially lower diversification benefits and prevent investors from experiencing gains when coronavirus-related volatility ultimately subsides and economic activity begins to recover.
Information is as of 03/16/20.

Opinions are those of the authors and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation.

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
March 13, 2020

What's driving volatility, and what could be next?

The opinions are those of the author(s) and subject to change.
The Dow Jones Industrial Average dropped 10% on Thursday — the worst single-day drop in more than 30 years1 — offering fresh evidence of the severe effect the coronavirus is having on markets, as well as people’s health. "This is a shock unlike what we've seen before," says Michelle Meyer, head of U.S. Economics for BofA Global Research. "People are fearful, and they are responding." Yet while the U.S. economy may "flirt with falling into recession" in the second and third quarters, containment of the virus could still lead to a turnaround this year, she says.
In a new audiocast, Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, and experts from BofA Global Research share their thoughts on what's driving the volatility, how long it may continue, and when we might see the return of long-awaited stability. Listen to their conversation below
Hyzy leads this important discussion featuring:
  • Mark Cabana, Head of U.S. Interest Rate Strategy, BofA Global Research
  • Michelle Meyer, Head of U.S. Economics, BofA Global Research
  • Savita Subramanian, Head of U.S. Equity and Quantitative Strategy, BofA Global Research
  • Michael Hartnett, Chief Investment Strategist, BofA Global Research

What investors can consider doing now

One of the hardest things for any investor to do right now is also among the most important: Hold tight, Hyzy says. But holding tight doesn't mean doing nothing. "Now is the time to develop a plan of action so that it's ready to put into place when volatility subsides."
Investors should prepare to rebalance or work with an advisor to rebalance portfolios thrown out of kilter by the volatility and consider new opportunities. "We're still in the early stages of understanding the full impact of the COVID-19 coronavirus on the economy and specific industries," he adds. "Given that we expect volatility to remain in the near future, we also continue to emphasize diversification at the asset-class level and within asset classes."
For more insights from our Chief Investment Office, read "Double Exogenous Shock: Short-Term and Long-Term Implications."
1 "Dow Plunges 10% in Worst Drop Since 1987 Market Crash Amid Coronavirus Fears," MarketWatch, March 12, 2020

Information is as of 03/13/20.

Opinions are those of the authors and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation.

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
March 12, 2020

When could the markets stabilize?

The opinions are those of the author(s) and subject to change.
That's the question top of mind for investors coming to terms with the extreme volatility they've experienced related to the spread of coronavirus and plunging oil prices. On Wednesday, the Dow Jones Industrial Average entered a bear market — or more than 20% down from its previous high — for the first time in 11 years1. While it's impossible to predict what could eventually stabilize the markets, policy actions may be key, says Michael Hartnett, Chief Investment Strategist for BofA Global Research.
Partially driving the decline is the heightened uncertainty investors feel about the potential effects of coronavirus on the economy — and their own lives. It's too early to know whether possible additional action by the Federal Reserve, beyond its March 3rd .5% interest rate cut, and various government proposals under consideration will help to jumpstart the economy and reassure investors. But such actions are positive signs, says Hartnett. They clearly indicate that policy makers are prepared to take dramatic steps.
"With more data, including new policy responses, we should have a better understanding of the eventual economic and market impact," notes Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.

"The three P's"

While precise forecasts are impossible, Hartnett says investors can probably expect the current volatility to potentially continue for at least another two weeks. In the meantime, Hartnett and other analysts will be closely watching the "Three P's" — policy, positioning, and profits — for signs that markets are stabilizing.
"Policy" includes any actions the federal government and central banks, such as the Federal Reserve, may take. "Positioning" refers to investors who sell stocks or other investments out of panic. At some point, those investors will have sold everything they can, and the selling will begin to ease, notes Hartnett. "Profits" mark the point at which investment markets have factored in their worst assumptions about corporate earnings. As recently as 2016 and 2018, says Hartnett, the Three P's came together to signal the end of volatility.
Of course, every situation is unique, and this time market volatility is unfolding against the backdrop of a global pandemic. Still, "when you get to that point of bearish positioning and profit assumptions, and a big policy reaction may be put in place, you can get a big turnaround in the market," Hartnett says. "In order for the capital markets to stabilize, there needs to be a defined policy response," adds Hyzy.
Remember to stay focused on your financial goals and the long-term strategies you've put in place to pursue them.
— Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank

What can investors consider doing?

"Remember to stay focused on your financial goals and the long-term strategies you've put in place to pursue them," says Hyzy. Looking out over the next several years, diversification will be key. "As the market volatility subsides, we would look for rebalancing opportunities, in accordance with your risk profile, in order to maintain diversification and possibly help to alleviate the effect of the declines investors have been experiencing."
1 "Dow Skids Into Bear Market, Heralding an Uncertain Future," New York Times, March 11, 2020.

Information is as of 03/12/20.

Opinions are those of the authors and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation.

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Dividend payments are not guaranteed, and are paid only when declared by an issuer's board of directors. The amount of a dividend payment, if any, can vary over time.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
March 10, 2020

Special Audiocast: The latest on coronavirus, the markets and economy

News surrounding the global spread of the coronavirus (COVID-19) is changing constantly. While uncertainty over how wide and severe the effects will ultimately be is causing panic selling in the markets — along with disruptions to businesses, travel and people's everyday lives — there are practical steps you can consider taking to stay focused on your long-term goals, and to help keep yourself and your family safe.
In this special audiocast, leaders from across Bank of America share important insights on what we currently know about the coronavirus and its potential impact on the markets and the economy.
Information is as of 03/10/20.

The views and opinions expressed are those of the presenters and are subject to change without notice.

This program is presented for informational purposes only and should not be used or construed as a recommendation of any service, security, or sector.

Dr. James Shepherd is not affiliated with Bank of America. Bank of America nor their affiliates provide healthcare advice.

Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and wholly owned subsidiary of Bank of America Corporation.
March 2, 2020

What coronavirus could mean for the health of the U.S. and global economies

The opinions are those of the author(s) and subject to change.
As coronavirus 2019 (COVID-19) concerns continue to mount, the definitive answers people want most are in frustratingly short supply. And while the immediate and overwhelming focus must be on the physical health of current and potential victims, events of the last week of February demonstrated what's at stake for the health of the U.S. and global economies as well.
The S&P 500 lost 11% of its value, the fastest such drop on record and the worst week since the 2008 financial crisis. Ten-year Treasury yields stood at 1.16% and 30-year yields at 1.67% — both record lows. "An outbreak like this is very difficult to model, especially in the initial stages," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
As we await firmer answers, Hyzy, Michelle Meyer, head of U.S. Economics for BofA Global Research, and Savita Subramanian, head of U.S. Equity & Quant Strategy and Global ESG Research for BofA Global Research, share their thoughts on what to look for in the markets next, and how investors can prepare.

What are the biggest risks right now for the U.S. economy?

Meyer: Looking at the economics of supply and demand, what we've seen so far is a supply shock. With Chinese suppliers disrupted, U.S. companies are worried about maintaining inventories and production. A supply shock alone would be painful but temporary. Companies would absorb the blow, find new suppliers and move on. The longer and more serious the crisis becomes, the greater the danger of a demand shock, where fearful consumers spend less, business confidence drops, and markets suffer even more. A demand shock could be much more problematic.
Hyzy: Coronavirus fears erupted at a time when leading indicators were quickly turning for the better. Amid strong consumer confidence, stock values and corporate profits were rising in unison, the Phase 1 U.S.-China trade deal had helped stabilize U.S. manufacturing, the housing market was robustly recovering, and global economies had bottomed out and were showing signs of improvement. A lot hinges on how quickly health authorities manage to treat and contain the virus.

How has the outlook for corporate earnings and U.S. and global GDP changed?

Subramanian: Before last week we were expecting U.S. corporate earnings to grow by 7% to 8% in 2020. Instead, we might be looking at lower single digits, and clearly the market is already anticipating lower earnings. We're now expecting below-trend U.S. gross domestic product (GD) growth of 1.6% for 2020, and our economic team recently lowered its global GDP forecast by 0.3% to 2.8%. That all sounds bad. But it's important to note that if the virus is contained we could see a surge of pent-up demand for products and services. So while this is not going to be as good a year as we were expecting, we could very well see an earnings recovery in the second half.

What is the likelihood of a recession?

Meyer: Thanks to a still-positive yield curve and strong fundamentals of the U.S. economy, we put the chance of a recession at about one in three over the next year. Will we see one tomorrow? I don't think so. But if this develops into a global pandemic, then a global recession is very likely.
Hyzy: Last week's steep drop indicates that markets are already reacting to that "what if?" scenario, versus what we believe is more likely — the virus will be contained. China's stock market, which declined rapidly three weeks before the U.S. volatility of last week, has already bottomed out and rallied about 14%. Though that recovery remains volatile and in the early stages, we'll be watching U.S. markets for signs of stabilization in the weeks to come. For historical perspective, there have been just 10 instances since 1948 when the S&P 500 has dropped 8% or more over six consecutive days. In each case, a year later stocks were up an average of 20% or higher.
China's stock market has already bottomed out and rallied about 14%. Though that recovery remains volatile, we'll be watching U.S. markets for signs of stabilization in the weeks to come.
— Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank

How is the Federal Reserve likely to respond?

Meyer: We believe the Federal Reserve (Fed) will cut interest rates by 50 basis points at its March 18 meeting to help stimulate the economy. If conditions worsen, they could make emergency cuts before then. One thing they'll be watching especially closely is the yield curve. When the yield curve goes negative, that's often seen as a warning sign for recession.

What can investors be doing?

Subramanian: When news comes quickly and markets respond erratically, the most important thing is to stay invested. The best days of market returns typically come after the worst days, and panic selling could cause you to miss out when markets recover. We looked at the data for a hypothetical investment going back to the 1930s. Left alone until today, that investment returned almost 15,000%. But when we omitted just the 10 best days for each decade, the return dropped to 91%.1
The best days of market returns typically come after the worst days, and panic selling could cause you to miss out when markets recover.
— Savita Subramanian, head of U.S. Equity & Quant Strategy and Global ESG Research for BofA Global Research
Hyzy: Investors should avoid trying to time the markets by anticipating short-term movements and focus instead on long-term goals and objectives. It's especially important for investors to stay diversified and strategically rebalance their portfolios.
For example, amid falling yields, bond prices have risen disproportionately high. In the coming weeks, investors may want to consider using some of those bond gains to rebalance with stocks of large, high-quality U.S. companies that have solid balance sheets and offer attractive dividends. One area to look at is utilities, which have little exposure to global supply chains. However unsettling the coronavirus situation becomes, don't lose sight of long-term drivers of economic growth, such as innovation. We see opportunities in robotics, 5G technology, software and infrastructure, to name a few.
1 S&P: BofA US Equity and Quant Strategy
Information is as of 02/27/20.

Opinions are those of the authors and are subject to change.

Forecasts are hypothetical and subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group ("ISG") of GWIM, a division of Bank of America Corporation ("BofA Corp.").

BofA Global Research is research produced by BofA Securities, Inc. ("BofAS") and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation.

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

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.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.

Bank of America nor their affiliates provide healthcare advice.
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