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Breaking insights on the economy, market volatility, policy changes and geopolitical events.
May 23, 2024

Reasons to join the 'Stay Invested' party this election year

Markets are essentially apolitical. "That's the main thing investors should keep in mind during election years," says Joe Quinlan, head of Market Strategy for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank. Long-term market returns are driven more by market fundamentals, like the strength of the economy and corporate earnings, than they are by assumptions about a political candidate's possible future policies.
Making investment decisions along political party lines is a great way to underperform the broader market. Joe Quinlan, head of Market Strategy, Chief Investment Office, Merrill and Bank of America Private Bank.
So, while it's true that uncertainty about the outcome of elections can cause heightened volatility,Footnote 1 investors shouldn't "vote" with their assets by trying to reconfigure their portfolios to align with what may lie ahead. "Making investment decisions along political party lines is a great way to underperform the broader market," says Quinlan.
"Instead, join the 'Stay Invested' Party," he suggests. History tells us that U.S. equity returns during election years and non-election years are not dramatically different.
U.S. equity returns during election years vs. non-election years. 7.5% Average S and P 500 returns during election years, since 1928. 8% Average S and P 500 returns during non-election years, since 1928. Source: Value calculated using S and P 500 daily total returns gross dividends. Sources: Bloomberg: Bespoke Investment Group. Data as of April 23, 2024. Past performance is no guarantee of future results. It is not possible to invest directly in an index.
What's more: From 1953 to the present, $1,000 fully invested in the S&P 500, regardless of party in power, would be worth $1.7 million today versus only $56,000 if you kept the same amount invested only during Democrat-led administrations, and $30,000 if you kept it invested only during Republican-led administrations.Footnote 2
"All the more reason not to try to time the markets or make major moves before Election Day," says Quinlan, who offers these three useful reminders for investors during election years:
  • Stay focused on your long-term goals.
  • Stay diversified across all asset classes, with an emphasis on quality.
  • Above all, stay invested.
"In fact," he says, "you could consider using periodic volatility leading up to the election as an opportunity to add to your portfolio."
For more timely insights, watch "Investing in a year of election uncertainty." And be sure to read Capital Market Outlook (PDF) and tune in to the CIO's Market Update audiocast series regularly.
Footnote 1 Source: Average Chicago Board Options Exchange Volatility Index (VIX) Performance in Election Years since 1990. Bloomberg. Data as of 2020 Election.

Footnote 2 Value calculated using S&P 500 daily total returns gross dividends. Sources: Bloomberg; Bespoke Investment Group. Data as of April 23, 2024.
May 3, 2024

A brighter future for renewable energy stocks?

With renewable energy equities tumbling by more than half since their highs in early 2021Footnote 1, investors may wonder if the sun has set on solar and wind. It isn't even high noon — the underlying drivers are as strong as ever, says Joe Quinlan, head of Market Strategy in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. "We believe the global transition toward a clean energy future is still very much in progress."
[Music in background]
[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
[Animated glitches end.]
On screen copy:
Market Decode
On screen disclosure:
Please read important information at the end of this program. Recorded on 03/26/2024.
[Joe Quinlan speaking throughout]
After a post-pandemic boom, renewable energy stocks went bust. So, where is the sector headed now?
On screen copy:
Joe Quinlan
Head of CIO Market Strategy, Chief Investment Office
Merrill and Bank of America Private Bank
Hi, I'm Joe Quinlan, with a closer look at why we believe renewable or clean energy, despite recent headwinds, holds long-term potential for investors.
First, some background:
On screen copy:
MSCI Global Alternative Energy Index more than tripled from March 2020 to Jan. 2021.
Source: MCSI. Past performance is no guarantee of future results. It is not possible to invest directly in an index.
From March 2020 to January 2021, the MSCI Global Alternative Energy Index more than tripled – amid global commitments to clean energy and growing concerns over the climate and the availability of fossil fuels. Since then, solar, wind and other renewables have given up virtually all those gains. Why? We see four key factors at play.
On screen copy:
Challenges for renewable energy
  • Sector has become overvalued
  • Rising rates made financing more expensive
  • Competition from natural gas
  • Drop in demand from China
First, the wave of excitement left the sector overvalued. Second, rising interest rates made financing of projects and equipment more expensive. Third, declining natural gas prices made renewables less competitive. And finally, the economic slowdown in China helped spur a drop in demand.
The good news is, we believe these challenges, while real, are temporary and unlikely to stem the transition to a clean energy economy.
On screen copy:
Good news for renewable energy
  • Emissions reduction policies remain priorities
  • Energy security favors alternative fuels
  • Technology improvements
  • Falling costs and rising efficiency
Emissions reduction policies at the local, national and international levels remain priorities. Energy security, a growing concern in Europe and globally, argues in favor of alternative fuels. And as the technology continues to improve, costs should fall as efficiency rises.
In addition, a decline in inflation, along with a shift towards lower interest rates could contribute to a resurgence for the sector.
On screen copy:
Potential opportunities include solar and wind,
manufacturers of related components, and commodities.
That could create investment opportunities in solar and wind projects, as well as manufacturers of batteries, inverters and other components, and commodities such as copper, nickel, lithium, graphite and cobalt.
For more timely insights on the economy and the markets, be sure to read our weekly Capital Market Outlook. Thanks for watching.
On screen disclosure:
Important Disclosures
The opinions expressed are as of 03/26/2024 and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. All sector and asset allocation recommendations must be considered in the context of an individual investor's goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration. Investing in commodities or the securities of companies operating in the commodities market involves a high degree of risk, including strategies and investment practices that may increase the risk of investment loss, including the principal value invested.
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.
MSCI Global Alternative Energy Index includes developed and emerging market large, mid and small cap companies that derive 50% or more of their revenues from products and services in Alternative energy.
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.").
Merrill makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill's obligations will differ among these services. Investments involve risk, including the possible lo ss of principal investment.
The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC and other affiliated banks.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp. Trust and fiduciary services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
© 2024 Bank of America Corporation. All rights reserved. 651813 – 03/2024
[End of transcript]
In the "Market Decode" video above, Quinlan looks at the myriad factors that drove clean energy stocks to new heights and more recently spurred their decline. He also highlights the forces shaping a potential comeback for the sector, as well as the market segments that could benefit from this ongoing shift in the global energy mix.
For a deeper dive, read "Renewable energy equities: What next after the boom and bust?" in this edition of the CIO's Capital Market Outlook. You can find more on investing and the environment in "Climate risk and the markets: 5 key questions answered." And be sure to check out our most recent Capital Market Outlook for the latest market news and insights.

TEST YOUR MARKET KNOWLEDGE

Tap  the following items to select the correct answer and learn more
Q: True or false: The world's biggest carbon dioxide emitter is also the world's biggest renewable energy consumer?
Footnote 1 MSCI; Bloomberg; Chief Investment Office. Data as of January 2024.

Footnote 2 The New York Times, "U.S. and China on Climate: How the World's Two Largest Polluters Stack Up," July 19, 2023.
April 10, 2024

How troubling are the interest costs on U.S. debt?

With Federal interest payments reaching $659 billion in 2023, some investors fear the government's spiraling costs to service rising debts could disrupt the broader economy. "That's a big, concerning number — nearly twice the level from 2020," notes Joe Quinlan, head of Market Strategy for the Chief Investment Office (CIO) at Merrill and Bank of America Private Bank. "Fortunately, we believe the U.S. economy is large enough to limit any market impact."
Quote: Follow the news but avoid precipitous reactions and instead stay well-diversified and focused on long-term investment goals.
The situation. The spike reflects two dynamics, Quinlan notes in the latest CIO Capital Market Outlook report: A $9.5 trillion surge in U.S. debt from 2020 to 2023 and higher U.S. Treasury rates.
The concern: Higher government borrowing costs could push borrowing costs for businesses and individuals higher for longer, dragging the economy down in the short term.
Keeping perspective. Even at elevated rates, government interest payments represent about 2.4% of U.S. GDP.Footnote 1 "That's higher than over the past decade, but we see this as manageable for a $28 trillion economy that remains the most dynamic and innovative in the world," says Quinlan.
Investment considerations. "Investors should follow the news but avoid precipitous reactions and instead stay well-diversified and focused on long-term investment goals," Quinlan advises.
Tune in to the CIO's Market Update audiocast series weekly to stay up to date on financial news that could affect your investments.

TEST YOUR MARKET KNOWLEDGE

Tap  the following items to select the correct answer and learn more
Q: What percentage of U.S. government spending goes to paying debt interest?
Footnote 1 Sources: U.S. Office of Management and Budget; Federal Reserve Bank of St. Louis. Data as of April 5, 2024.

Footnote 2 Congressional Budget Office. February 2024.
March 11, 2024

Investing in a year of election uncertainty

Investors concerned about the potential impact of the 2024 U.S. election on the markets might take comfort in this history lesson, says Lauren J. Sanfilippo, senior investment strategist for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank. "Heated election cycles are nothing new, and they've never slowed the world's largest economy for long." In fact, between 1945 and 2023, stocks on the S&P 500 have returned an annualized 11.41%Footnote 1 — with plenty of elections along the way, she notes.
[Music in background]
[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
[Animated glitches end.]
On screen copy:
Market Decode
On screen disclosure:
Please read important information at the end of this program. Recorded on 03/05/2024.
[Lauren Sanfilippo speaks throughout video]
While the elections in November might still feel a long way off, all sides agree a lot is at stake this year, for both the U.S. and the world. No wonder we're hearing from investors with concerns about managing risks as the date creeps closer.
On screen copy:
Lauren Sanfilippo
Senior Investment Strategist, Chief Investment Office
Merrill and Bank of America Private Bank
Hi, I'm Lauren Sanfilippo, with some thoughts on keeping this election in perspective and separating actual risks from hype and noise.
On screen copy:
Elections do matter, from geopolitics, to defense to global trade.
First, elections do matter and this one is shaping up as deeply contentious, with key issues at stake, from geopolitics to defense to global trade.
On screen copy:
Elections often bring volatility, but it's usually short-lived.
Second, elections often do bring elevated market volatility. The good news is, this volatility is usually short-lived. Heated election cycles are nothing new, and they've never slowed the world's largest economy for long.
On screen copy:
We believe company profits matter more than politics.
While politics can influence markets, company profits, which we believe are showing signs of reaccelerating, matter more.
So, how can you keep your goals on track amid the distractions?
On screen copy:
Tips for keeping your goals on track
  • Stay invested
  • Diversify across asset classes
  • Look for opportunities to add stocks
  • Consider bonds for income
  • Take the "long view"
First, stay invested and avoid risky attempts to "time the markets." Second, diversify across asset classes to help stabilize your portfolio when markets are volatile.
Third, if we do get some volatility, look for opportunities to add stocks at more attractive prices, guided by your long-term strategy. Fourth, consider looking to bonds as a source of stable income — such as U.S. Treasurys and high-quality corporate bonds — and also to dividend-paying stocks.
And, finally, take the long view and maybe a deep breath.
On screen copy:
Between 1945 and 2023, stocks in the S&P 500
returned an annualized 11.4%.
Source: Bloomberg,1945-2023.
Past performance is no guarantee of future results. It is not possible to invest directly in an index.
Between 1945 and 2023, stocks in the S&P 500 have returned an annualized 11.4%, with plenty of elections in between.
For more timely insights on the economy and the markets, be sure to read our weekly Capital Market Outlook. Thanks for watching!
On screen disclosure:
Important Disclosures
The opinions expressed are as of 03/05/2024 and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.
Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. 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.
All sector and asset allocation recommendations must be considered in the context of an individual investor's goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors
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.
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.").
Merrill makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill's obligations will differ among these services. Investments involve risk, including the possible lo ss of principal investment.
The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC and other affiliated banks.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp. Trust and fiduciary services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
© 2024 Bank of America Corporation. All rights reserved. 651813 – 03/2024
[End of transcript]
Watch the "Market Decode" video above for specific ideas on how to help limit the potential effects of election-related volatility on your portfolio this year. For more in-depth insights, read "That Y2K feeling is back, but it's political this time," co-written by Sanfilippo, in the February 26 Capital Market Outlook and watch "Global elections and the markets: What to expect in 2024."
Footnote 1 Bloomberg, 1945-2023

Past performance is no guarantee of future results. It is not possible to invest directly in an index.
February 21, 2024

What happened to that anticipated March rate cut?

Expecting the Federal Reserve to pivot from rate hikes to rate cuts, starting in March, investors rode a wave of anticipation, driving the DOW and S&P 500 indexes to new highs early in the year. Then came slightly higher than expected January Consumer Price Index (CPI) numbers (0.3 percent month over month, rather than an anticipated 0.2 percent increaseFootnote 1), sending markets into a brief tizzy, with investors wondering: Should we be concerned about the economy?
[Music in background]
[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
[Animated glitches end.]
On screen copy:
Market Decode
On screen disclosure:
Please read important information at the end of this program. Recorded on 02/14/2024.
[Matthew Diczok speaks throughout video]
With inflation trending downward, some market observers expected that the Federal Reserve would begin cutting interest rates as early at its upcoming March meeting. But the Fed recently tried to dash those expectations. And January's inflation figures, which showed consumer price inflation not slowing as much as many economists expected, provided a further reason for a likely delay.
So, should investors be alarmed? Will short-term interest rates — at some of the highest levels in more than 20 years — stay where they are for substantially longer? Is there something deeper occurring in the economy that makes a resurgence in inflation a more pressing concern?
In our view, the answers are, "no, no and no."
On screen copy:
Matthew Diczok
Head of Fixed Income Strategy, Chief Investment Office
Merrill and Bank of America Private Bank
Hi, I'm Matthew Diczok, head of Fixed Income Strategy for the Chief Investment Office, with some thoughts on when we might see the Fed pivot to cutting rates — and how you can prepare.
On screen copy:
Federal Reserve's two primary goals: maximum employment and lowering inflation to its 2% target.
The Fed is walking a delicate line between its two primary goals: maximum employment and lowering inflation back to its 2% target.
Waiting too long to cut rates could stall the economy and lead to higher unemployment than necessary. But cutting too quickly could overstimulate the economy and reignite inflation.
On screen copy:
Goal is a "soft landing" with economy settling between 0% and 2% growth without going into recession.
The goal is a "soft landing," with the economy settling in between 0% and 2% growth, without going into a recession.
Despite the potential for periodic inflation spikes and volatility, we believe the era of high inflation is generally behind us and that rate cuts could start in June or July of this year. Yet as Fed members sift through recent strong labor reports and other evolving data, we shouldn't be alarmed if they appear to change their minds from month to month. What matters is the Fed's overall mindset — and we believe they are firmly in easing mode for this year, regardless of when the first rate cut occurs.
On screen copy:
Preparing for accelerating economic growth
  • Explore small-cap equities
  • Watch emerging market stocks
  • Consider longer-duration bonds
Meanwhile, we think investors can start preparing for a possible period of accelerating economic growth. We recently increased our weighting to small-cap equities and continue to watch emerging market stocks, both of which finished 2023 with strong momentum. Those assets, while risker than large-cap stocks, may have attractive return potential during an extended bull market. Bond investors with significant cash holdings might consider investing in longer-duration bonds.
Of course, as always, any investment decisions should align with your long-term investing goals, your risk tolerance and your time frame. If you work with an advisor, ask what, if any, changes make sense for your situation.
On screen copy:
For more insights, read our
weekly Capital Market Outlook.
For more timely insights on the Fed, interest rates, the economy, and markets, be sure to read our weekly Capital Market Outlook and tune in to the CIO Market Update audiocast series.
Thank you, and talk again soon.
On screen disclosure:
Important Disclosures
The opinions expressed are as of 02/14/2024 and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. 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.
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.
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.").
Merrill makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill's obligations will differ among these services. Investments involve risk, including the possible lo ss of principal investment.
The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC and other affiliated banks.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp. Trust and fiduciary services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
© 2024 Bank of America Corporation. All rights reserved. 6412618 – 02/2024
[End of transcript]
Not to worry, says Matthew Diczok, Head of Fixed Income Strategy for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank. Year over year, the latest CPI numbers showed a continuing downward trend — 3.1% from 3.4%.Footnote 1 And though the Fed indicated that rate cuts were unlikely to happen in March, "We shouldn't be alarmed if Fed officials appear to change their minds from month to month. What matters is the Fed's overall mindset, and we believe they are firmly in easing mode for this year."
Watch the video above to find out when the CIO believes the Fed will finally pivot, what it might mean for the markets and how you can prepare. And tune in to the CIO's Market Update audiocast series for regular insights on the economy and the markets.
Footnote 1 CNBC, "Prices rose more than expected in January as inflation won't go away," Feb. 13, 2024.
February 15, 2024

3 reasons to get off the sidelines and invest in equities

Despite periodic volatility — as we saw after higher than anticipated January inflation numbers were released — the equity markets have performed exceptionally well so far this year. The S&P 500Footnote 1 and the Dow Jones Industrial AverageFootnote 2 hit record highs, and the NASDAQ Composite Index has come close to its all-time high from 2021.Footnote 3 While that's good news for investors who already own stocks, those with significant cash on the sidelines may wonder if they've missed the boat. So, is getting into the market now too expensive?
That may be the wrong question to ask. "Valuation alone is not a good gauge of which way the market will trend," says Emily Avioli, investment strategist in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. One thing is certain: "Staying in cash because stocks seem too expensive — or the markets too volatile—could lead to potential missed opportunities," she adds. Here's why.
There's room to grow. Markets are prone to periodic volatility related to inflation news, geopolitical concerns, presidential elections and more. "Yet we have seen 11 years with new all-time highs since the current secular bull market kicked off in 2013," Avioli says. "And, given our view that it still has room to run, we could see years of new all-time highs ahead."Footnote 4
You can still find relative bargains. While S&P 500 stocks are trading at a price-to-earnings (P/E) valuation ratio of about 20.0x — well above the historical average of 16x — "S&P 500 stocks outside of the mega-cap 'Magnificent Seven' companies have a current average P/E ratio of about 18x," Avioli says. "And beyond the S&P 500, investors may find attractively priced small-cap and value stocks."
Quote: Consider using any near-term volatility as an opportunity to add to equities
"Consider using any near-term volatility as an opportunity to add to equities," suggests Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "Corporate earnings remain healthy, and despite January's higher than expected Consumer Price Index numbers, the CIO maintains its view that the Federal Reserve will likely begin a measured interest-rate cutting cycle in June or July."
Cash carries its own risks. While it's important to maintain some cash in your portfolio, cash typically hasn't performed as well as stocks over the long term. In any given year, cash has a 24% chance of outperforming stocks, Avioli notes. But since 1979, over stretches of 15 or 20 years, stocks have outperformed cash.Footnote 5
In the end, while it's always preferable to pay less rather than more for a stock, valuation is just one factor to consider when you're investing, Avioli adds. Other factors, including your long-term goals, risk tolerance and time horizon, are essential. "The best approach is to invest steadily in stocks, bonds and cash according to your long-term strategy."
Learn more about investing in a bull market by reading "Considerations for investing at all-time highs" in the recent Capital Market Outlook from the CIO. And follow up by reviewing "How much is too much cash in your portfolio?"
Footnote 1 Reuters, "S&P 500 closes at record high; earnings, rate outlook in focus," Feb. 7, 2024.

Footnote 2 Morningstar, "Dow scores 12th record close ahead of U.S. inflation data," Feb. 12, 2024.

Footnote 3 Reuters, "Nasdaq slips from near all-time high, Dow up modestly ahead of inflation data," Feb. 12, 2024.

Footnote 4 Bloomberg. Data as of February 7, 2024.

Footnote 5 Bloomberg. Data as of January 31, 2024. The market is represented by the S&P 500 Index. Cash is represented by ICE BofA U.S. 3-month Treasury Bill Index. Refers to instances in which cash outperformed Equities over stated holding periods.
February 6, 2024

New goal: Limiting geopolitical risk in your portfolio

While Ukraine and Gaza dominate headlines, they're just two of more than 180 current regional conflicts, the highest number in 30 years.Footnote 1 A global landscape marked by such rising tension and uncertainty could affect U.S. and global economies, markets—and investors—for years to come, notes Joe Quinlan, head of Market Strategy in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank.

Description

Title
[Music in background]
[Animated glitches containing various letters flip to spell out the following financial terms.]
[On-screen text]
Bear Market
Business Cycle
Risks
Bull Market
Fixed Income
Inflation
Equities
Diversification
Interest Rates
Opportunities
Geopolitics
Market Catalysts
[On-screen text]
Market Decode
[On-screen text]
Please read important information at the end of this program. Recorded on 01/22/2024.
[Joe Quinlan speaking throughout]
Despite rising geopolitical tensions, U.S. and global markets posted record or near-record gains in 2023. Does this mean investors can disregard the potential impact of geopolitics in the future? In our view, far from it.
[On-screen text]
Joe Quinlan
Head of Market Strategy, Chief Investment Office
Merrill and Bank of America Private Bank
Hi, I'm Joe Quinlan, with a look at why global events could matter for the markets and your portfolio in the coming year.
It's true that many global markets have performed well, despite wars in Europe and the Middle East, elevated U.S.-China tensions and disruptions to international trade.
But these and other events could present longer-term risks that no investor should ignore, such as:
GRAPHIC CARD
[On-screen text]
Geopolitical risks to watch:
  • Supply chain disruptions
  • Higher shipping costs
  • Rising defense spending
  • Greater dislocations of people
  • Higher government deficits
Supply chain disruptions, higher shipping costs, rising defense spending, greater dislocations of people, and higher government deficits.
This is not a case for putting a pause on investing or making any major changes to your long-term strategy.
LOWER 3RD
[On-screen text]
Geopolitics should play a role in investment decisions,along with traditional metrics.
It simply means that geopolitics should also play an important role in your investment decisions, along with traditional metrics such as earnings growth, interest rates and valuations.
So, what's most important to consider from here?
LOWER 3RD
[On-screen text]
A high-quality, diversified portfolio could offer a good defense against geopolitical tensions
We believe a high-quality, broadly diversified portfolio can offer investors a good defense during times of heightened geopolitical tensions. In addition, the U.S. economy remains the most dynamic, diversified and resilient on earth.
As such,
GRAPHIC CARD
[On-screen text]
  • We maintain a preference for U.S. assets over the rest of the world.
  • Within the U.S., we are constructive on:
    • Large-cap defense companies
    • Cybersecurity companies
    • High-quality dividend-paying stocks
we maintain a preference for U.S. assets over the rest of the world, including Europe, Asia and emerging markets, which could be most vulnerable to geopolitical shocks. Within the U.S., we are constructive on large-cap defense and cybersecurity companies, as well as high-quality dividend-paying stocks.
LOWER 3RD
[On-screen text]
For more insights, read our weekly Capital Market Outlook.
For more timely insights from the CIO, be sure to read our weekly Capital Market Outlook, and we'll continue to keep you up-to-date on these and other changes in the markets.
[On-screen disclaimers]
Important Disclosures
The opinions expressed are as of 1/22/2024 and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. All sector and asset allocation recommendations must be considered in the context of an individual investor's goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors. 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. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
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.
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.").
Merrill makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill's obligations will differ among these services. Investments involve risk, including the possible lo ss of principal investment.
The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC and other affiliated banks.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp. Trust and fiduciary services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
© 2024 Bank of America Corporation. All rights reserved. 6269335 - 01/2024
"Don't pause investing or diverge from your long-term strategy, but do consider geopolitics along with corporate earnings, valuations and other metrics when making investment decisions," Quinlan suggests. Watch the "Market Decode" video above for tips on how to incorporate geopolitics into your investment decisions.
For more insights, read "Are the markets really impervious to geopolitical risks?" in the January 8, 2024 Capital Market Outlook, and tune in to the Market Update audiocast series for weekly check-ins on the markets and economy.
Footnote 1 International Institute for Strategic Studies, 2023. Bloomberg, "It's Not Just Ukraine and Gaza: War is on the Rise Everywhere," Dec. 10, 2023.
November 1, 2023

Getting comfortable with "higher for longer"

HFL stands for "Higher For Longer," and it doesn't just apply to interest rates anymore, says Joe Quinlan, head of CIO Market Strategy. Given the tight labor market, strong wages and elevated energy prices, it's unlikely rate cuts will come any time soon, Quinlan explains. Markets and investors have pretty much accepted that fact. But the HFL trend also applies to a number of other areas that could affect the markets and your investing decisions. Among them: global energy prices, defense spending and the U.S. deficit.

Description

Title
[On-screen text]
Higher for longer isn't just for interest rates anymore
Please read important information at the end of this program. Recorded on 10/19/2023
[Joe Quinlan speaking throughout]
HFL... It may sound like a new sports league. But it's actually a trend we believe will shape the investment landscape for the next several years.
[On-screen text]
Joe Quinlan, Head of CIO Market Strategy, Chief Investment Office, Merrill and Bank of America Private Bank
Hi, I'm Joe Quinlan, with a look at what HFL -- which stands for "higher for longer" -- could mean for the markets and for your portfolio.
[On-screen text]
A "Higher-for-Longer (HFL) world"
  • Interest rates
    First up, interest rates. A tight labor market, strong wages and elevated energy prices are help keeping inflation higher than the Federal Reserve's target range, likely dashing hopes of any rate cuts any time soon.
[On-screen text]
A "Higher-for-Longer (HFL) world"
  • Global energy prices
    Next, global energy prices are being fueled by rising geopolitical tensions, along with oil production cuts and tighter supplies heading into the colder months.
[On-screen text]
A "Higher-for-Longer (HFL) world"
  • Global defense spending
  • U.S. budget deficit
  • Political discourse in DC
Also on the HFL list: global defense spending, the U.S. budget deficit and the pitch of political discourse in Washington
So, what does this mean for investors?
[On-screen text]
Higher rates should be favorable for cash and fixed income
On the positive side, higher rates should be favorable for cash and fixed income.
[On-screen text]
Elevated oil prices could boost energy stocks and commodities
Elevated oil prices could boost energy stocks and commodities, such as metals and minerals.
[On-screen text]
Strong defense spending could help equities in defense and cybersecurity
And strong defense spending may help equities in defense and cybersecurity.
On the other hand, the growing deficit could weaken the U.S Dollar and Washington politics could weigh on consumer and business confidence.
For more, read our Capital Market Outlook for October 10th. And if you're working with an advisor, check with them about what these insights could mean for you.
[On-screen disclaimers]
Important Disclosures
The opinions expressed are as of 10/19/2023 and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. 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. Investing in commodities or the securities of companies operating in the commodities market involves a high degree of risk, including strategies and investment practices that may increase the risk of investment loss, including the principal value invested.
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.
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.").
Merrill makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill's obligations will differ among these services. Investments involve risk, including the possible lo ss of principal investment.
The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed banks and trust companies, including Bank of America, N.A., Member FDIC and other affiliated banks.
Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp. Trust and fiduciary services are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
© 2024 Bank of America Corporation. All rights reserved. 6028857 - 10/2023
Watch the video above for what these higher-for-longer trends could mean for your portfolio. For more insights, read "Higher-for-Longer Goes Beyond Interest Rates: What Investors Need to Know" in the October 10, 2023 Capital Market Outlook and tune in to the CIO's Market Update audiocast series for weekly insights on the markets and economy.

Next steps

Important Disclosures

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

Opinions are as of the date of these articles and are subject to change.

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.

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.").
All recommendations must be considered in the context of an individual investor's goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best interest of all investors.

Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.

These risks are magnified for investments made in emerging markets. 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.

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).

Retirement and Personal Wealth Solutions is the institutional retirement business of Bank of America Corporation ("BofA Corp.") operating under the name "Bank of America." Investment advisory and brokerage services are provided by wholly owned non-bank affiliates of BofA Corp., including Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill"), a dually registered broker-dealer and investment adviser and Member SIPC. Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A., Member FDIC.

You have choices about what to do with your employer-sponsored retirement plan accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth IRA, roll over an employer-sponsored plan from your old job to your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment (particularly with reference to employer stock), and different types of protection from creditors and legal judgments. These are complex choices and should be considered with care. For more information visit our rollover page or call Merrill at 888.637.3343.
Diversification does not ensure a profit or protect against loss in declining markets.

Sustainable and Impact Investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.

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