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Breaking insights on the economy, market volatility, policy changes and geopolitical events.
June 2, 2023

Speedy passage of debt ceiling bill averts default

THE SENATE PASSED A NEW DEBT CEILING BILL late Thursday, June 1, averting a potentially catastrophic default. The Senate vote, which suspends the debt ceiling until January 1, 2025, came quickly after the House of Representatives passed the bill on Wednesday. The president is expected to sign the bill into law by Monday.Footnote 1
'The agreement adds a degree of stability that markets and investors will welcome.' - Chris Hyzy, Chief Executive Officer, Merrill and Bank of America Private Bank

How we got here

Democrat and Republican legislators were locked in a standoff since January, when the government reached its $31.4 trillion debt ceiling. Without an agreement by June 5, the government may not have been able to fully meet its payment obligations, including Social Security benefits and payment of interest on federal debt, according to updated estimates by the Treasury.Footnote 2 "They went from no talks to intensive talks really quickly," says Jim Carlisle, Federal Government Relations Executive at Bank of America.
The new bill imposes modest cuts to non-military spending — fewer than Republicans sought and more than Democrats hoped for, Carlisle notes. "Nobody loves this compromise, but it's good for the body politic," he says, and compromise bodes well for future budget matters. Just as vital for investors is what the bill prevents. "A default could have suspended payments to holders of government bonds, caused a spike in interest rates and jolted U.S. and global markets," says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank.

How markets could respond

"In recent weeks, markets have rallied on anticipation of a deal," Hyzy says. "The key is that the ceiling has been suspended until after the next presidential election." Though that eliminates some uncertainty, the economy and markets may continue to face some pressures, he adds. "Even the limited spending cuts included in the bill could create a modest drag on the economy, and the Treasury will need to re-stock its general account, removing some liquidity from the markets," Hyzy adds. "Still, the agreement adds a degree of stability that markets and investors will welcome."
Footnote 1 The Wall Street Journal, "Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default," June 2, 2023.

Footnote 2 The Wall Street Journal, "Debt Ceiling: House Approves Deal Struck by Biden and McCarthy," May 31, 2023.
May 23, 2023

What to expect as the debt crisis comes down to the wire

With debt ceiling talks stalled over the weekend, the president and Speaker of the House met Monday in hopes of averting an historic default on payments by the U.S. government. Without an increase in the nation's debt ceiling (the amount it can legally borrow) the government by June 1 could be out of money to support Social Security and Medicare recipients, pay military personnel and other government workers, pay interest to Treasury bondholders, or meet myriad other obligations.
The face-to-face meeting (in place of negotiations by staffers) represents both the seriousness of the situation and reason for hope that a resolution may be at hand, says Dan Clifton, head of Washington Research for Strategas Research Partners. "That doesn't guarantee a deal but it puts things on a better trajectory."
Consumers have solid balance sheets, corporate profit margins are holding steady, and the S&P 500 is up almost 10% since the start of 2023. Chris Hyzy, Chief Executive Officer, Merrill and Bank of America Private Bank
In the end, neither side wants a default that could send shockwaves through the U.S. and global economies, adds Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank. "That would almost certainly result in a downgrade in the government's credit rating, accompanied by a fresh spike in interest rates," Hyzy says. "This would make borrowing more expensive for consumers and corporations already facing the highest rates in over a decade."

Clearing the remaining hurdles

Despite positive signs, thorny issues remain before both sides agree to raise the $31.4 trillion ceiling. Clifton points to four key areas:
  • Democrats have been resisting Republican calls for spending cuts as a condition of raising the debt ceiling. A possible compromise: Eliminate $60 billion in COVID funding that has not yet been obligated.
  • Republicans want caps on discretionary (non-entitlement) spending, representing a third of the federal budget. While cuts are unlikely, compromise might reduce spending growth from 2.5% to 2% per year over the next decade, saving about $1 trillion.
  • While the administration opposes proposed work requirements for Medicaid and food stamp recipients, negotiators may agree on modest reforms to Temporary Assistance for Needy Families programs, enabling both sides to claim victory.
  • One area where the sides remain most divided involves expedited energy permitting aimed at increasing production. Democrats want to accelerate renewable energy production and transmission; Republicans seek faster permitting for natural gas. While the issue is not directly related to the budget, negotiators may include language on renewables and natural gas, creating political "wins" all around, Clifton believes.

What's next when the crisis ends?

When the debt ceiling lifts, investors should still expect short-term market and interest rate volatility as the Treasury, using "extraordinary measures" to pay bills since January 19, refills its depleted coffers, Hyzy warns. Over the next several years, the need for government austerity, after historic COVID relief spending, could create economic headwinds, Clifton adds.
The good news: "Consumers have solid balance sheets, corporate profit margins are holding steady, and the S&P 500 is up almost 10% since the start of 2023," Hyzy says. All of which speaks to the importance for investors not to react in haste to the latest debt ceiling reports or other financial news, and to focus instead on their long-term goals. Staying the course and maintaining a well-diversified portfolio can help to weather the market's shorter-term ups and downs.
For more on the debt ceiling crisis and its potential effects on markets and the economy, read the recently updated CIO report, "Debt Ceiling Questions and Answers (PDF)." For regular weekly insights from the Chief Investment Office, tune in to the CIO Market Update audiocast series.
May 5, 2023

Will the Fed's latest rate hike be the last for a while?

In its ongoing effort to tame inflation, the Federal Reserve (Fed) hiked interest rates by another 25 basis points at its latest policy meeting. It was the 10th straight increase in a little over a year, lifting the fund rate to its highest level in 16 years.Footnote 1 But that's not the big news, says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. More interesting is what the Fed signaled about its intentions for possible future hikes.

Description

Title
Please read important information at the end of this program. Recorded on 5/4/2023
Hello, Chris Hyzy here.
[LOWER 3rd]
CHRIS HYZY
Chief Investment Officer
Merrill and Bank of America Private Bank
The Federal Reserve's latest 25 basis point interest rate hike marks the tenth straight increase, taking us from near-zero rates a little over a year ago to the highest levels in 16 years. The hike raises the Funds rate to a range of five to five and a quarter percent.
But that isn't the big news. More important than the widely expected hike are clear signals that the Federal Reserve may finally be ready to pause this historic stretch of fast-paced hikes, reflecting growing confidence that both inflation and a red-hot labor market may finally be slowing down.
So, does this mean we're out of the woods in terms of volatility and choppy markets? Not yet.
There are still enough unknowns to keep markets churning in the coming weeks or months including geopolitics, corporate earnings weakness, and regional bank stress. Year-to-date, just five or six companies are responsible for 70% of market gains.
Another challenge: the federal debt ceiling stalemate. Treasury Secretary Janet Yellen warned this week that Congress may have only until June 1 to reach a compromise, raise the debt ceiling and avoid government default.
In addition to further Fed news, we'll be looking for signs that inflation continues to fall. In the meantime, we expect markets to continue in what we call a choppy, "grind-it-out" state.
All of which reinforces our emphasis on staying with high quality, diversifying portfolios both across and within asset classes and looking for opportunities to rebalance, as appropriate.
If you're working with an advisor, don't hesitate to reach out to them with questions.
Thanks, and stay tuned.
[-] Close transcript
The next Fed meeting takes place on June 14 and 15. In the meantime, there are other potential challenges to keep an eye on. Watch the video above to find out why Hyzy says, "We expect markets to continue in what we call a choppy, grind-it-out state" and what you can do to navigate possible ongoing volatility.
Footnote 1 The Wall Street Journal, "Federal Reserve Raises Rates, Signals Potential Pause," May 3, 2023.
May 2, 2023

New rules tighten electric vehicle tax credit eligibility

If you're looking for a new car this Spring, you may be thinking: Is this the year I finally go electric? Electric vehicle (EV) sales have surged as the larger auto market has struggled in recent months,Footnote 1 with available state and federal tax credits at least partly driving adoption. Charging stations are popping up at gas stations, office complexes and condos, and as the technology evolves, prices are finally beginning to come down.
Even if you don't qualify for a tax credit, there may be good financial as well as environmental reasons to consider switching from pump to plug. Mitchell Drossman, head of National Wealth Strategies, Chief Investment Office, Merrill and Bank of America Private Bank

Will you qualify for a tax credit?

Before you make the switch, here's what you should know about the federal EV tax credit of up to $7,500 for new EV purchases. While last year's Inflation Reduction Act extended the credit through 2032, it also tightened rules for claiming it. Under those new rules, only individuals earning $150,000 or less ($300,000 for couples) are eligible.Footnote 2 And even if you personally qualify, your EV must meet strict requirements for percentage of mineral and battery components sourced in North America or by U.S. free trade partners.Footnote 3
Regulations implementing these rules, which took effect on April 18, reduced the number of EVs that qualify for the full credit. Today, "only a relative handful of models qualify, compared with the 72 that made the cut last year," says Mitchell Drossman, head of National Wealth Strategies in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. And, over the next several years, these sourcing percentages will rise, meaning additional vehicles could fall out of compliance. But, overall, the new rules take a taxpayer-friendly approach that should enable more EVs to qualify for the credits in the coming years, Drossman adds. This Go to third-party website Department of Energy site popup can help you determine if yours makes the cut.
If your model is eligible but your income is too high, leasing could be an option. Companies that buy and lease eligible EVs earn the tax credit and may be willing to pass that savings along as an incentive. (Check whether your state offers a tax credit or sales tax exemption for leased or purchased EVs.) Another option: As of January 1, 2023, if you buy a used EV from a dealer for $25,000 or less, you could also be eligible for a federal tax credit equal to 30 percent of the sale price, up to a maximum credit of $4,000.

A growing market — for drivers and investors?

By 2025, EVs could represent 20% of U.S. vehicles, a sevenfold increase over 2021, research by Bank of America Institute suggests.Footnote 4 Yet hurdles remain, to be sure. For example, while U.S. charging stations are growing, the country will need far more than the current 140,000 in order to support a robust EV market, according to S&P Global.Footnote 5
So, is this the year for you to seriously consider going electric? "As with any financial decision, it's important to research carefully and make a choice that suits your needs," Drossman says. "Even if you don't qualify for a tax credit, there may be good financial as well as environmental reasons to consider switching from pump to plug."
For more insights on the size of the EV market, availability of charging stations by state, and other EV trends, read "EVs on the Charge," by the Bank of America Institute. And listen to "The EV Revolution" Merrill Perspectives podcast.
Footnote 1 Cox Automotive, "In a Down Market, EV Sales Soar to New Record," Jan. 13, 2023.

Footnote 2 IRS, "Credits for new Clean Vehicles Purchased in 2023 or After," Updated April 17, 2023.

Footnote 3 U.S. Treasury, "Treasury Releases Proposed Guidance on New Clean Vehicle Credit to Lower Costs for Consumers, Build U.S. Industrial Base, Strengthen Supply Chains," March 31, 2023.

Footnote 4 Bank of America Institute, "EVs on the charge," Nov. 7, 2022.

Footnote 5 S&P Global, "EV chargers: How many do we need?" Jan. 9, 2023.
April 14, 2023

What's at stake in the debt ceiling stalemate?

THE CURRENT FEDERAL DEBT CEILING DEBATE is rapidly approaching the "X-date" — the day when the government exhausts its ability to borrow money to meet its obligations, such as funding Social Security, Medicare, military salaries and other expenses. "This could come as early as June 1, according to Treasury Secretary Janet Yellen,Footnote 1 unless a divided Congress and the White House come together to raise the debt ceiling," says Mitchell Drossman, head of National Wealth Strategies in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank.
A recent CIO report, "Debt Ceiling Questions and Answers (PDF)," explains the factors that could determine when funding will run out, how the situation could affect the markets, and what investors can consider doing as they navigate the uncertainty.
Where do things stand now?
The government reached its $31.4 trillion debt ceiling — the amount of debt it is legally allowed to accumulate — in January. For now, the Treasury Department is using accounting steps called "extraordinary measures" to pay bills. When those run out, the government risks defaulting.
Is a compromise in sight?
"While a default would wreak havoc on U.S. and global financial markets, that worst-case scenario is highly improbable," says Marci McGregor, head of Portfolio Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank. "Since 1960, the government has navigated 78 debt ceiling standoffs without defaulting," notes Drossman. Pressure for a compromise — perhaps a combination of a higher debt ceiling and some spending cuts — will intensify as the X-date nears, he adds.
Meanwhile, though, market uncertainty could increase volatility, especially for risk assets such as stocks. During a 2011 debt ceiling crisis that ended two days before the funding ran out, stocks on the S&P 500 fell by 17%, Drossman notes. Financials, energy and real estate struggled most, while consumer staples and utilities (which consumers need regardless of economic conditions) fared better.
"The longer it takes for Congress to reach a 2023 debt ceiling agreement, the more likely it is that risk assets will experience volatility," McGregor says. "And the debt ceiling drama is just one source of potential volatility." Factors ranging from inflation to Federal Reserve monetary policy and a slowing economy could have an even greater impact.
What can investors consider doing?
"While a resolution to the debt ceiling impasse is likely, uncertainty in the short term could mean ongoing market volatility and risks for investors," says McGregor. For investors, the most important task may be to recognize what's going on and remain calm even when markets temporarily don't. "Volatility is a normal part of investing," McGregor notes. "A portfolio well diversified across high-quality stocks and bonds is the best approach for the current 'grind-it-out' market conditions."
Footnote 1 Associated Press, "Treasury's Yellen Says US Could Default As Soon As June 1," May 1, 2023.
April 6, 2023

Sustainable investing: What you need to know now

"Invest in our planet" is the theme of Earth Day 2023, set for April 22 — an annual call to action to commit to helping reduce the effects of climate change. "Individual investors have an unprecedented opportunity to support the shift to renewable energy, while pursuing their own financial goals," says Sarah Norman, head of ESG Thought Leadership for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank.
At the same time, Norman acknowledges that many investors today have questions about how current events, from the conflict in Ukraine to global inflation and more, might affect their sustainable investments. In the Q&A below, Norman addresses three key questions and highlights the short- and long-term risks and opportunities emerging.
Q: What effect will the Ukraine-Russia conflict have on renewable energy as countries scramble for oil to meet their energy needs?
A: The energy shock related to Russia's 2022 invasion of Ukraine may delay, but won't derail, global efforts to curtail greenhouse gas emissions, Norman says. "While governments have embraced fossil fuels to meet their immediate needs, the Ukraine crisis has only accelerated long-term ambitions for a world powered by renewable energy."
Key takeaway: "In the past two decades, significant cost declines and technological improvements have made clean energy more economically competitive,"Footnote 1 Norman says. Investors have more options than ever to invest in addressing climate change, she believes. As one example, the 2022 Inflation Reduction Act earmarked $369 billion for clean energy spending. Industries likely to benefit include not just renewable energy and electric vehicles, but entire sectors such as industrials, materials, utilities and energy.
Q: Should I divest fossil fuels entirely — or is there a transition period to consider?
A: "The transition from oil and gas to renewable energies will take decades," Norman says. And with many oil and gas companies developing technologies to transition their own businesses, investors may want to be part of that story. "In the short term, stocks linked to energy prices may also provide an important hedge against inflation."
Key takeaway: "Rather than divesting entirely, consider best-in-class energy companies likely to lead the transition from fossil fuels," suggests Norman. "At the same time," she says, "explore long-term investments in clean energy." This may include direct investment in renewables, or sectors such as utilities, industrials and materials, likely to benefit from the energy transition.
Q: What commodities could be attractive in a net zero carbon future?
A: "Going green won't be easy," Norman says. Renewable power requires fossil fuels, metals and minerals. "Copper, for example, is essential to electric vehicles, charging stations and supporting the electrical grid."Footnote 2 Other essential commodities include cobalt, nickel and zinc, as well as water — large quantities of which are needed for mining and mineral processing.
Key takeaway: Consider commodities as part of a broader strategy of "FAANG 2.0" investments, Norman suggests. That acronym refers to areas likely to benefit during the energy transition, including fuels, aerospace and defense, agriculture, nuclear and renewables, and gold and other metals and minerals.
For more insights, read "Portfolio Construction and the Energy Transition: Q&A on What Investors Need to Know," from the Chief Investment Office, and consider the role that sustainable and impact investing could play in helping you meet your goals.
Footnote 1 Lazard, "Levelized Cost of Energy Analysis," 2021.

Footnote 2 Wood Mackenzie, "Copper: Powering up the Electric Vehicle," August 13, 2019.
March 20, 2023

Navigating current volatility

Listen to the audiocast below for insights from Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank, on what's driving market uncertainty, the path to market stability, key indicators to watch and how investors can prepare for steadier times ahead.
View transcript
Tune in regularly to the CIO Market Update audiocast series for the news and insights you need to navigate today's fast-moving markets.
February 13, 2023

Early 2023 surprises hint at improving markets ahead

Despite all the talk about high inflation, global turmoil and the possibility of recession, "so far it's been a surprisingly good year for many investors," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.

Description

Title

What are the economy and markets doing right?

Please read important information at the end of this program.
Recorded on 02/07/2023.
With all the talk about high inflation and interest rates, global turmoil and recession, you could easily overlook that so far, 2023 has been a pretty good year for many investors. Surprisingly good, in fact.
Hello, I'm Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
CHRIS HYZY
Chief Investment Officer
Merrill and Bank of America Private Bank
Let's look at a few of those surprises.
[GRAPHIC CARD]
Early 2023 surprises
  • January was a strong month for stocks
  • Small-cap stocks have outperformed expectations
As-of Feb. 7, 2023
U.S. stocks posted strong gains in January, major global indexes started the year up 5% or more, and even beleaguered tech stocks have rallied. Small-cap stocks have done significantly better than expected at a time when inflation and slower economic growth seemed likely to pressure them.
[GRAPHIC CARD]
Early 2023 surprises
  • January was a strong month for stocks
  • Small-cap stocks have outperformed expectations
  • Fed raised rates by only 0.25% at its Feb. 1 meeting
As-of Feb. 7, 2023
The Federal Reserve recently raised interest rates by only 25 basis points. That's about half the increase we saw in December and a sign of Fed confidence that inflation is finally moderating.
[GRAPHIC CARD]
Early 2023 surprises
  • January was a strong month for stocks
  • Small-cap stocks have outperformed expectations
  • Fed raised rates by just 0.25% at its Feb. 1 meeting
  • Europe's economy has been looking up
As-of Feb. 7, 2023
And there was a big surprise overseas: Europe. A mild winter has kept energy prices under control despite the war in Ukraine, and the reopening of China, Europe's largest trading partner, has boosted the economy. Add it all up and European stocks have thus far outperformed expectations.
You may be asking, "Why are market watchers downplaying the good news?" We're wondering the same. Some worry about lack of liquidity in the bond markets or that money supply growth turned negative. Others say the recent tech rally is misleading and stock valuations must drop further before they finally bottom out.
These are all valid concerns. Now, we're not out of the woods yet, and we still think a mild recession is likely later this year or in early 2024.
[LOWER 3rd]
We believe markets may have already
factored in some of the biggest risks
But we also believe markets may have already factored in some of the biggest risks that we have all been discussing for quite some time… and what we are seeing is a glimpse of a new and improved economic and market cycle ahead.
How can you prepare?
We suggest a two-part approach:
[GRAPHIC CARD]
2 approaches you could take to prepare
  • Consider more "defensive" investments for now:
    • U.S. Treasuries and municipals bonds
    • Healthcare and energy stocks
First, consider an active approach on defense for the next several months of uncertainty. More attractive yields likely mean bonds such as U.S. Treasuries and municipals are competitive again and can provide a good ballast to portfolios. Among stocks, we are currently favoring healthcare and energy sector stocks for potential total return, including dividends and solid earnings growth.
[GRAPHIC CARD]
2 approaches you could take to prepare
  • Consider more "defensive" investments for now:
    • U.S. Treasuries and municipals bonds
    • Healthcare and energy stocks
  • Consider more "offensive" investments later this year:
    • Value and small-cap stocks
    • European and emerging markets
But we also believe you should consider shifting to offense for a time of greater stability 12 to 18 months out. You might already start looking for opportunities to strategically add exposure to value stocks, small-caps, and European and emerging markets stocks, among others.
[LOWER 3rd]
Remember to stay diversified across
and within different asset classes.
As you look ahead for opportunities, though, remember it's important to stay diversified across different types of assets and within each asset class. Market direction can change quickly and many times without clear signals.
If you're working with an advisor, be sure to speak with them about steps to consider based upon your goals and what's in your best interest. And we'll continue to keep you posted as events unfold.
Thank you.
Important Disclosures
The opinions expressed are as of the date of this video and are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results. It is not possible to invest in an index.
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.
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
This material does not take into account a client's particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select. For more information about these services and their differences, speak with your advisor.
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.").
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. Stocks of small-cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies.
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. Bonds are subject to interest rate, inflation and credit risks. 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. 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 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.
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Investment products:
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© 2023 Bank of America Corporation. All rights reserved. 5454333 - 02/2023
[-] Close transcript
Among the surprises: U.S. stocks posted strong gains in January, major global indexes started the year up 5% or more, and the Federal Reserve's (the Fed's) .25% rate hike in February was about half the size of December's increase.Footnote 1 "It's a sign of Fed confidence that inflation is finally moderating," believes Hyzy. "We're not out of the woods yet, and we still think a mild recession is likely later this year or in early 2024," he says. "But what we are seeing is a glimpse of a new and improved economic and market cycle ahead."
Steps to consider now
In the video above, Hyzy offers a two-part investing approach to help investors prepare for a time of greater stability 12 to 18 months out and manage investments in the meantime. "As you look ahead for potential opportunities," Hyzy says, "remember it's important to stay diversified across different types of assets and within each asset class. Market direction can change quickly — many times without clear signals."
Read "Distortions Are Rebalancing and Markets Are Applauding (PDF)" for more actionable insights from the Chief Investment Office (CIO), and tune in to the CIO Market Update audiocast series for weekly commentary from our analysts.
Footnote 1 The Conference Board, "Fed Hikes by 25 BPS, but Indicates Terminal Rate Is Close," February 1, 2023.

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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