Market briefs

Breaking insights on the economy, market volatility, policy changes and geopolitical events
April 29, 2026

Rate-decision repeat: Fed stands pat again

The Federal Reserve (The Fed) responded to current economic and geopolitical uncertainty by maintaining a wait-and-see approach at its April 29 meeting. In what may be its final meeting with Jerome H. Powell as chair, the Fed kept the federal funds rate at between 3.50% and 3.75%, as it has done since the start of 2026.
With labor demand soft and wage growth cooling, we still see room for two rate cuts later this year, especially if inflation remains contained. Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
When could the cutting cycle resume?
"After three successive Fed rate cuts of .25% at the end of 2025, markets entered 2026 expecting additional cuts to help grow the economy," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Then geopolitics intervened. The Iran conflict generated waves of stock volatility, higher energy costs and fears of resurgent inflation.
More recently, a tenuous ceasefire brought lower oil prices and hopes that the conflict would wind down soon. "With labor demand soft and wage growth cooling, we still see room for two rate cuts later this year, especially if inflation remains contained," Hyzy says. "But everything depends on the economic data and continued de-escalation of the conflict."
Moving forward, rapid development of artificial intelligence (AI) could make those calls even tougher, he notes. A recent Capital Market Outlook article from the CIO, "AI, Productivity, and R*," suggests AI productivity growth could pressure rates upward even as AI-related job losses call for cuts.
A more immediate uncertainty: Who will sit as chair for the Fed's next rate decision, in June? Under Powell, whose second four-year term ends May 15, the Fed navigated pandemic-related economic crises and helped ease inflation from 9.1% in 2022 to 3.1% in February 2026. Yet its 2% inflation target has proved elusive, and the administration, criticizing Powell as too slow to cut rates, has nominated former Fed governor Kevin Warsh as his replacement. Powell has said he will hold his position until a new chair is confirmed.2
Ways to consider positioning your portfolio
"Over the long term, we believe the Fed's cutting cycle will continue, supporting growth in a U.S. economy that has proven remarkably resilient,"Hyzy says. This could create potential opportunities in the housing, financial and automotive industries, as well as small cap stocks, all of which tend to benefit from lower rates. Fixed income investors could consider adding longer-term bonds to their portfolios to lock in current higher rates. (For more insights on what potential future rate cuts could mean for you, read "Plan ahead to take advantage of Fed rate cuts.")
But keep in mind that markets and investors are subject to the same uncertainties that are complicating the Fed’s rate decisions. He adds, "The precise timing of Fed decisions matters less than keeping your portfolio diversified across and within asset classes and rebalancing after periods of volatility."
For more news and analysis, listen to our latest CIO Market Update audiocast and check here for regular updates on the economy, the markets and where interest rates could be headed next.

POP QUIZ: How much power over rates does the Fed chair have?

Tap + to select correct answer and learn more
True or false: Decisions to increase, reduce or maintain interest rates are voted on by the 12 members of the Federal Reserve's Federal Open Market Committee (FOMC). The Fed chair, like the other 11, has only one vote.
Footnote 1 PBS News, "Top Fed official sees potential rate hike amid higher gas prices, inflation concerns," April 6, 2026.

Footnote 2 The New York Times, "Powell says he will remain as Fed chair until successor is confirmed," March 18, 2026.
April 20, 2026

Will an inflation shock cause emerging markets to falter?

When investors hear "inflation shock," emerging markets (EM) might spring to mind, especially when the catalyst is geopolitical tension with implications for energy prices. The familiar concern: higher oil prices feed inflation, central banks tighten policy, growth slows and EM assets ultimately feel the pressure. But recent inflation dynamics among EM economies may be meaningfully different from past cycles.
The classic risk: energy prices and inflation pressure
A prolonged Middle East conflict could push global inflation higher through energy, commodity, and food prices. This scenario played out in early 2022, when an energy shock driven by the conflict in Ukraine sent inflation across many emerging economies into high single or low double-digit territory, triggering volatility and sharp policy responses in the form of rate hikes. Against that backdrop, it's reasonable to ask whether another oil spike could lead to a similar outcome.
Higher energy prices don't always equate to aggressive tightening for emerging markets. Lauren Sanfilippo, Senior Investment Strategist, Chief Investment Office, Merrill and Bank of America Private Bank
A different starting point today
The comparison may be imperfect. Across many emerging economies, inflation is starting from a far more contained position than it was in early '22: Data analysis in the Q1 2026 CIO Chart Book (PDF) shows that in several cases across EMs, Consumer Price Index (CPI) readings have been sitting below central bank targets, potentially reducing the risk of additional tightening even if energy prices spike further.
For February 2026, inflation was below the central bank target number for Brazil, India, South Africa, the Philippines, Chile, Peru, Poland, Hungary and China. It was approximately at the target number for Mexico and South Korea. Inflation was above the central bank's target for Colombia. This CPI Inflation chart compares consumer price inflation across 12 countries at two points in time - Q1 2022 and February 2026 - and shows each country's central bank inflation target for reference. Colombia: Inflation was 5.3 percent in February 2026; 3.2 percent Q1 2022; Central Bank target at 4 percent. Mexico: Inflation was 4 percent in February 2026; 3.4 percent Q1 2022; Central Bank target at 4 percent. Brazil: Inflation was 3.8 percent in February 2026; 7.5 percent Q1 2022; Central Bank target at 4.5 percent. India: Inflation was 3.2 percent in February 2026; 3.7 percent Q1 2022; Central Bank target at 6 percent. South Africa: Inflation was 3 percent in February 2026; 2.9 percent Q1 2022; Central Bank target at 6 percent. Philippines: Inflation was 2.4 percent in February 2026; 1.6 percent Q1 2022; Central Bank target at 4 percent. Chile: Inflation was 2.4 percent in February 2026; 7 percent Q1 2022; Central Bank target at 4 percent. Peru: Inflation was 2.2 percent in February 2026; 4.6 percent Q1 2022; Central Bank target at 3 percent. Poland: Inflation was 2.1 percent in February 2026; 8.9 percent Q1 2022; Central Bank target at 3.5 percent. Korea: Inflation was 2 percent in February 2026; 2.2 percent Q1 2022; Central Bank target at 2 percent. Hungary: Inflation was 1.4 percent in February 2026; 7.1 percent Q1 2022; Central Bank target at 4 percent. China: Inflation was 1.3 percent in February 2026; 0.2 percent Q1 2022; Central Bank target at 2 percent.
Source: Bloomberg. Data as of February 2026. Latest data available. *Central bank inflation targets shown are the upper bound when set as a range.
This distinction matters because it is often the policy response — not inflation alone — that turns price shocks into growth slowdowns. "The starting point of lower inflation changes the equation," continues Sanfilippo. "Higher energy prices don't always equate to aggressive tightening for emerging markets."
A broader view on emerging markets
Despite elevated uncertainty, the overall growth and market outlook has not materially changed, and diversification across regions remains central to portfolio construction, Sanfilippo says.
She adds that in the CIO's view, EM performance today is a function of more than inflation alone. Currency trends, regional sector exposure, and long-term growth drivers matter just as much. EM Asia — now close to 80% of total EM market capitalization — is deeply connected to global technology supply chains and AI-related capital investment, while some commodity-producing markets can benefit from higher prices rather than suffer from them.
Revisit the CIO's outlook on emerging markets from earlier this year:
Video: Emerging Markets Outlook for 2026 Potential Opportunities
Press enter to play 'Emerging Markets Outlook for 2026 Potential Opportunities' video
On screen copy:
Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
On screen copy:
Please read important information at the end of this program. Recorded on 1/22/2026.
[Chris Hyzy faces the camera and speaks directly to the audience. The shot then pans to a conversational discussion between Chris and Lauren Sanfilippo.]
Chris Hyzy
Hi, I'm Chris Hyzy, chief investment officer for Merrill and Bank of America private bank. Today, we're looking at one of the most notable shifts in our outlook for 2026.
On screen graphic:
Emerging markets showing momentum:
Strong 2025 performance
Broadening global expansion
Apparently overvalued dollar
Which is a more positive stance on emerging markets, a strong 2025 performance, a broadening global expansion, and a dollar that appears overvalued are contributing to this shift, along with tailwinds including potential lower interest rates and easing of oil prices. With capital rotating back into emerging assets, now is potentially a pivotal time to assess EM in your portfolio. What's behind these trends and what do they mean for investors?
On screen copy:
Lauren Sanfilippo
Senior investment strategist
Chief Investment Officer
Merrill and Bank of America Private Bank
Joining me now is senior investment strategist Lauren Sanfilippo to break it all down. Lauren, welcome.
Lauren Sanfilippo
Hi, Chris.
Chris Hyzy
We're going to start at the top. We have this concept called what's rare this year. What's rare in terms of growth around the world. Whether it's the US potentially above 5% nominal growth around the world collectively 6% at a time where short interest rates in the states are coming down. Typically, when you see geopolitical activity rise, you get a stronger dollar, not a weaker dollar like we've seen recently. There's a lot of rarities out there. Let's start with the emerging markets and let's go into what is different with the emerging markets within the context of what just happened in 2025.
On screen copy:
Emerging markets returned 34% in 2025, outperforming the S&P 500 by 16 points.
Source: Bloomberg data from MSCI Emerging Markets and S&P 500 Indexes.
Past performance is no guarantee of future results.
Lauren Sanfilippo
What's rare is that the emerging markets actually outperformed almost put up double the performance that the US did last year. And so in that sense, we're coming into the year already with markets a little bit hot. And so I think the set up is a little bit rare this year. It's just a story of chronic underperformance from the emerging markets. But a lot of the forces now have aligned. Whereas global growth, is narrowing. The divergence is narrowing between the rest of the world and the U.S., that's one.
On screen copy:
Global growth expected to reach 3.4% in 2026.
Source: IMF World Economic Outlook Update, January 2026
Earnings momentum looks good for emerging markets. And we have global trade that's reaccelerating. So there's a lot of good things that are happening that are rare in a sense for emerging markets.
Chris Hyzy
When bucket the emerging markets all together, we can't look away from the fact that overwhelmingly large part of the index is China. We'll get there in just one second. But when we put all of the emerging nations together as an asset class, what type of earnings growth are we expecting? Is it above what the US can potentially create for all of 26?
Lauren Sanfilippo
Yeah. You know it's roughly in line with the US but just different factors right. So whereas in the US we're looking at earnings that instead of it just being powered by seven tech companies, hyperscalers overwhelmingly their earnings growth is decelerating. And we're seeing the broadening from the 493 come up behind that tech sort of earnings outperformance that we've seen in recent years. Now for EM the story is a little bit different right. And some of those earnings trends just look really good. You're looking at for example the tech-oriented economies in markets, right, that we think are very compelling opportunities in 2026.
Chris Hyzy
Let's talk about China. A few years ago, China technology segment of China itself kind of went to the wayside a little bit. We didn't really talk about it, even though they were building this so-called dominance or at least race for dominance against the US. And then all of a sudden, they're supportive. There's particular government expenditures that are supportive of China technology in general. But also we're starting to hear about other stimulus with the consumer. Is that a contributing factor to being overweight the emerging markets?
On screen copy:
China represents 27% of the MSCI Emerging Market Index.
Source: Factset, as of 1/22/2026
Lauren Sanfilippo
There's a lot going right in China now where that that wind is really changed. Right. And it's 27% of the EM index. And so this is a weight that matters. It's a little bit similar in, in Latin America, actually. Different EM here in the sense that Mexico takes up a lot of that index. And so concentration is a risk.
Chris Hyzy
You talked about earnings growth. We talk about valuation in the United States of being at a premium. What's the valuation like collectively in the emerging markets.
On screen copy:
Emerging market equities offer attractive valuation multiples vs. U.S.
Lauren Sanfilippo
Yeah. So actually valuation is a compelling opportunity in emerging markets. And you know where there's been concerns over AI. Maybe these valuations got a little bit lofty for some investors here in the US. You can actually look for those opportunities abroad at valuations that could be more attractive right. So I'm talking about tech oriented markets such as Korea, Taiwan even China. And so that's what we're looking at for this year.
Chris Hyzy
There's been a lot of changes politically in the emerging markets over the years. It seems to be relatively calm right now. When we think about an active way to think about the emerging markets, is geopolitical risk still one of the bigger risks out there as it relates to the direction of asset prices?
Lauren Sanfilippo
Geopolitical risks are very much so part of the equation this year. We've seen what's gone on just year to date, right? In the few trading weeks that we've had.
Chris Hyzy
Feels like a half a year already.
On screen copy:
Supreme Court ruling on Trump administration tariffs could affect EM outlook.
Lauren Sanfilippo
For sure. And in front of us is still the IEEPA Supreme Court ruling the emergency powers over the tariffs. So trade and tariff frictions very much part of the story this year still. Right. That unfortunately didn't go away with 2025.
On screen copy:
Dollar-based investors are significantly underweight in emerging markets assets.
Chris Hyzy
One of the great benefits, at least right now, could potentially be the fact that dollar based investors are significantly underweight, emerging assets in general, emerging equity assets partially on the debt side as well. And with money flow, what other drivers are you thinking about with reallocation?
Lauren Sanfilippo
The dollar we see is still weakening this year right. Nothing like the 7% on a trade weighted basis dollar decline we saw last year, which primarily took place in the first half of the year. We foresee for this year still a softening in the US dollar. And so that would be a contributor and accretive to emerging markets.
Chris Hyzy
That's a very good point, because if you get the weaker dollar you get earnings growth, you get global growth going up. What tends to follow is natural resource prices also rallying, which we have seen in some cases not just precious metals but base metals and other parts of the natural resource spectrum is that is what is expected as well in 26.
Lauren Sanfilippo
Yeah. And I think you could also see like some of the industrial uses for some of those metals. Right. That's actually an attractive investment opportunity I think for us this year, particularly looking at Latam, just as a region that would probably benefit from that.
Chris Hyzy
Lauren we talked about earnings growth and valuation. Some other factors. Years ago for many decades frankly there was a high correlation to rising oil prices with enthusiasm, particularly as relates to Latin America within emerging markets. Do oil price direction matter just as much today as it did in the past. Or is there a different approach.
Lauren Sanfilippo
Different in the sense that China's growth model has changed a little bit, where it felt like in years prior is more like boom bust. Depending on what's happening in the commodity landscape, sort of what's happening in China, right. And vice versa. Now it's a lot different in the sense that China has actually tried to become more consumption based. Right. And so they're moving towards us. It's happening slowly. I mean, it did print on 1.2 trillion dollar trade surplus last year. And so they're still very much export oriented, but they are moving towards a more consumption based model.
Chris Hyzy
So an overall more diversified approach as to what is driving the enthusiasm over the emerging market landscape.
Lauren Sanfilippo
That's right.
Chris Hyzy
What are we missing? We talked about geopolitical risks. Is there anything else top of mind that you might be guarded about for us to watch for as it relates to emerging markets in general?
On screen copy:
Potential emerging markets downside scenario: global growth scare.
Lauren Sanfilippo
Yeah, I mean, maybe a global growth scare. It's all these things that we would probably factor in that just aren't right now factored into our models and assumptions. Right. So there are certainly things that could take place. But the overarching idea is that in Em would be sort of like any allocation would be a sleeve in the portfolio, right? In the sense that while this has been a great conversation about emerging markets, we have that US bias. And that's the core of the portfolio. So this would just be a little bit of a bolt on. Right. The diversified sort of aspects to a portfolio.
Chris Hyzy
Something that a dollar-based investor hadn't had to think about for a very long period of time.
Lauren Sanfilippo
Or wasn't able to.
Chris Hyzy
Great point. Lauren, I want to thank you for joining me today.
Lauren Sanfilippo
Thank you so much.
[The shot transitions back to just Chris on camera speaking directly to the audience.]
Chris Hyzy
Emerging markets are clearly an important part to consider for a balanced portfolio in 2026 and beyond. Alongside other shifts in asset classes and sector positioning. For guidance tailored to your long term goals, connect with your advisor, if you work with one, in order to see how these trends could work for you. I'm Chris Hyzy, thanks for watching and we'll see you next time.
On screen disclosures:
Important disclosures
The opinions expressed are as of 1/22/2026 and are subject to change.
Investing involves risk. Past performance is no guarantee of future results.
Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Investments have varying degrees of risk. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investments in emerging- and frontier-markets securities may be subject to greater market, credit, currency, liquidity, legal, political and other risks compared with assets invested in developed foreign countries.
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 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. 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.
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[End of transcript]
[-] Close transcript
What this means for portfolios
The CIO continues to view EM equities as offering attractive valuations with improving longer-term fundamentals, even as near-term volatility persists. But, Sanfilippo cautions, emerging markets are no longer a single, uniform story. Inflation and energy risks vary by region, with parts of EM Asia benefiting from technology and AI investment, and some commodity-oriented economies gaining from higher prices. We believe the takeaway for clients is straightforward: consider staying anchored to your EM allocation and using bouts of volatility to rebalance, rather than reacting to short-term swings in oil prices or geopolitical headlines.
Don't miss the April Viewpoint (PDF) report for the latest portfolio strategy ideas from the Chief Investment Office. Listen to our latest CIO Market Update audiocast, and check here for regular updates on the broader economy and markets.
March 18, 2026

Understanding the latest Federal Reserve rate pause

Amid mixed signals on jobs and inflation, the Federal Reserve (the Fed), as widely expected, held steady on interest rates at its March 18 meeting. The decision, which leaves the federal funds rate at between 3.50% to 3.75%, marks the second pause in 2026, following three consecutive rate cuts to close out 2025.Footnote 1
We expect the current rate-cutting cycle to resume later this year, but the pause will likely continue until the Fed has greater clarity on where the Middle East conflict, and inflation, are headed. Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank
Why the pause?
The economy's surprising loss of 92,000 jobs in FebruaryFootnote 2 might have argued for an additional rate cut to stimulate hiring. But surging oil prices since the Middle East conflict started on Feb. 28 have raised concerns that stubborn inflation could reignite — the Fed typically fights inflation by raising rates to cool the economy. "The Fed is walking a fine line between its goals of maximum employment and moderate inflation," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
What's next for the economy and rates?
"While some observers have warned of 1970s-style stagflation, when prices rise while the economy sputters, that's not our base case," Hyzy says. "U.S. energy production has made the economy more resilient against oil shocks. And the economy, despite some concerns, remains fundamentally strong." In addition, Hyzy says, "We expect the current rate-cutting cycle to resume later this year, but the pause will likely continue until the Fed has greater clarity on where the Middle East conflict, and inflation, are headed."
How can investors respond?
Investors might take a page from the Fed's playbook by remaining patient and avoiding hasty responses to geopolitically driven volatility, Hyzy advises. "Stay diversified across asset classes and invest with long-term goals in mind," he adds. "Periodically rebalance and look at temporary declines as potential opportunities to add to your portfolio."
Read the recent Capital Market Outlook article, "The Stagflation Scenario (PDF)." Listen to our latest CIO Market Update audiocast, and check here for regular updates on interest rates and other forces shaping the economy and markets.
Footnote 1 The New York Times, "Federal Reserve Leaves Interest Rates Unchanged," March 18, 2026.

Footnote 2 U.S. Bureau of Labor Statistics, "Employee Situation Summary," March 6, 2026
March 10, 2026

Navigating a new world of uncertainties in 2026

A war-related spike in oil prices drove sharp volatility in stocks as markets opened for the week of March 9.Footnote 1 Oil briefly topped $100 barrel — 40% higher than before the U.S. and Israel launched missile attacks on Iran on Feb. 28Footnote 2 — raising fears over broader economic impacts if the war widens and drags on. And the Middle East is just one of many concerns in a year of uncertainties. "Investors should expect elevated volatility in the months ahead," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "At the same time, it's important to stay focused on the underlying forces driving long-term growth."
Seeking signs of stability
In addition to oil prices and stock volatility, the Chief Investment Office will be watching several key market factors in the coming weeks for signs that conditions are stabilizing, Hyzy says. For example, credit spreads (the difference in yield between corporate bonds and U.S. Treasurys of similar duration) have been widening — often a sign of investor concern about the economy. "We're also closely following inflation, the strength of the U.S. dollar, and bond yields and rates, all of which should help dictate what's ahead for asset prices in the short and medium term."
We continue to emphasize patience, a balanced, diversified approach, and having a detailed plan to buy or rebalance on weakness. Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank
Tracking other uncertainties
Even without the Middle East conflict, other pressures have the potential to jolt investors and markets in 2026. One example: "Midterm elections, coming in November, typically bring higher-than-normal volatility," Hyzy says. Among the other possible contributors to volatility: the impact of artificial intelligence on the software industry, stresses in the private credit market, the partial government shutdown and its potential impact on the travel industry, the impact of tariffs, and more.
Keeping a long-term focus
While an extended war and persistently high oil prices present risks for the global economy, historically geopolitical events of this nature have had limited long-term impact, Hyzy notes. And the U.S., as a leading energy producer and net exporter of oil, may be less vulnerable than other regions to oil shocks, he adds. As for the other uncertainties, the volatility they may create, while unsettling, will likely be temporary, Hyzy believes. For example, "despite the volatility midterm elections cause, markets historically have hit new highs a year later," he adds.
"Given all the uncertainties, there's no clear timetable for market stabilization," Hyzy says. "We continue to emphasize patience, a balanced, diversified approach, and having a detailed plan to buy or rebalance on weakness." He advises long-term investors to avoid trying to "time" markets and instead stay focused on broader trends such as corporate earnings growth, rising capital investment, productivity, accelerated innovation and global economic growth.
For more perspective on the latest market moves, read Hyzy's Investment Insights article, The Six Senses (PDF), from March 9. Listen to our latest CIO Market Update audiocast, and check here for regular updates on the Middle East conflict and other volatility risks as the year progresses. For more on navigating the uncertain markets, read What can you do when the markets get volatile?
Footnote 1 NBC News, "Oil hits $100 per barrel for first time since July 2022," March 8, 2026.

Footnote 2 Reuters, "Iran war boosts oil price, but oil major shares are stuck on the sidelines," March 9, 2026.
March 2, 2026

Conflict in the Middle East: What to expect

The United States and Israel on February 28 launched a military campaign against Iran, with retaliatory strikes hitting Israel and other countries in the Middle East over the weekend.Footnote 1 "As markets open March 2, investors are preparing for potentially significant volatility," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
"Considering the many risks as tensions rise, we emphasize maintaining the highest level of diversification across all risk profiles," Hyzy adds. "That includes potentially allocating to areas that may see upward pressure as the military campaign unfolds." A new Investment Insights report details potential short-, medium- and long-term outlooks for industries and the economy (PDF).
Considering the many risks as tensions rise, we emphasize maintaining the highest level of diversification across all risk profiles. Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
Short-term outlook (three months)
"While U.S. economic uncertainties and market volatility will likely rise, fiscal and monetary support should keep the U.S. economy clear of recession and corporate profit growth intact," Hyzy believes. Expect higher gold and energy prices, especially if tanker passageways shut down. The energy and defense industries could rally, with consumer staples and healthcare outperforming. Cyclical stocks such as luxury goods and airlines may underperform, and technology could continue to struggle. And look for the U.S. dollar to strengthen and U.S. Treasurys to outperform credit markets, Hyzy believes.
Medium-term outlook (six to 18 months)
"Equity volatility should eventually fall towards normal levels," Hyzy believes. "Look for high-quality, dividend-paying stocks, utilities and industrials to lead, while technology and financial shares stabilize." The dollar should weaken slightly and credit markets stabilize and start to outperform Treasurys. "While uncertainties over upcoming mid-term elections could prompt investors to add non-U.S. exposure, we believe global and U.S. economic growth could surprise to the upside."
Longer-term outlook
"While the current uncertainties are deeply concerning in many ways, we do not expect a material effect on the global economy or corporate profits overall," Hyzy says. Historically, of 14 major geopolitical events since 1962, the S&P 500 index was up an average of 9.5% one year later,Footnote 2 he notes. "Our themes for long-term growth continue to be areas such as aerospace and defense modernization, robotics and automation, the biotechnology renaissance, new infrastructure, agentic AI applications and more."
What you can do
"In the very short term, investors should allow expected market volatility to subside somewhat before rebalancing portfolios," Hyzy suggests. "But have plans ready to take advantage of market weakness when tensions ease." Any potential adjustments should be guided by a long-term investment strategy based on your personal goals rather than trying to anticipate events, he says. "Timing markets is too difficult in normal conditions, let alone during periods of excessive geopolitical risk."
Read the Investment Insights article for a closer look at what to expect in the days and months ahead (PDF). Listen to our latest CIO Market Update audiocast, and check here for regular updates as the situation evolves.
Footnote 1 The New York Times, "Live updates: Iran retaliates against Israel and U.S. allies," March 1, 2026.

Footnote 2 Bloomberg. Data as of Jan. 26, 2026.
February 25, 2026

Is recent tech volatility AI's 'do or die' moment?

After years of market dominance, fueled by the rapid expansion of AI, technology stocks in 2026 have been notable mainly for their volatility. Software companies dropped more than $400 billion in value earlier this month,Footnote 1 and companies ranging from semiconductors to AI infrastructure have been battered.Footnote 2 "While it may feel like a major retreat from technology, we see this as part of a natural rotation towards greater balance between technology and other sectors," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
A recent article from the Chief Investment Office (CIO), "More Rotation Than Retreat (PDF)," details what's going on and how investors can respond.
Investors who leapt to embrace AI are now asking hard questions: Where are the bottlenecks? Who will the winners and losers be? Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
A rotation months in the making
Despite the recent headlines, the tech rotation actually started in 2025, when five of the "Magnificent Seven" tech giants underperformed the S&P 500 index.Footnote 3 "One explanation may involve investor fatigue after years of paying premium valuations for those companies," says Kirsten Cabacungan, CIO investment strategist and author of the report.
More fundamentally, notes Hyzy, "Investors who leapt to embrace AI are now asking hard questions: Where are the bottlenecks? Will there be enough energy to power the data centers? Who will the winners and losers be?" The early February software selloff, for example, was prompted by concerns that emerging AI tools could replace some core services currently provided by software companies. "This rethinking process happens with every major innovation," Hyzy says. "While tech companies may no longer benefit indiscriminately from investor enthusiasm, the transformative power of these new technologies is undimmed."
Broadening markets, underlying strengths
As markets take a breather on big tech, one offshoot has been a healthy broadening of markets. "A growing number of stocks in sectors such as materials, healthcare, industrials and consumer staples have reclaimed long-term uptrends," Cabacungan says. "This expanding participation suggests the bull market has developed a stronger and more durable foundation." As evidence, markets shrugged off tech sector woes and surged to new highs in early February.Footnote 4 Hyzy adds, "We believe the U.S. economy will surpass 5% nominal GDP growth in 2026."
Focus on diversification
"Investors should expect additional periodic tech volatility as the sector evolves," says Hyzy. These uncertainties underscore the importance of investing in a range of companies and technologies. Investing across industries could help you potentially benefit from broadening market performance, and with mega-cap companies struggling, you might consider the growth potential of mid- and small-cap stocks. "Above all, be patient and stick to an investment strategy built for your long-term goals."
For more on AI, watch "Progress report: Is AI a market bubble?" To keep up with the broader markets, tune in regularly to the Market Update audiocast from the Chief Investment Office.
Footnote 1 Axios, "AI wiped out $400 billion this week – and it's only getting started," Feb. 7, 2026.

Footnote 2 The Wall Street Journal, "Intensifying tech slide sends Nasdaq to worst two-day drop since April," Feb. 4, 2026.

Footnote 3 Los Angeles Times, "Top tech titans' dominance wanes in 2025," Jan. 12, 2026.

Footnote 4 CNN, "Stocks hit historic milestone as Dow crosses 50,000 points for the first time ever," Feb. 6, 2026.
February 20, 2026

The Supreme Court rejects tariffs. What now?

The U.S. Supreme Court on February 20 struck down many of the global tariffs imposed by the White House starting in 2025.Footnote 1 While a clear setback for the administration's broad use of tariffs as a tool in trade disputes and geopolitical relations, the decision leaves many unknowns to be worked out in the weeks ahead.
The news does not alter our bull market thesis and overweight on equities. Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
What we know
In a 6-3 decision, the court specifically rejected the administration's claims of authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), saying that would amount to "a transformative expansion" of presidential authority. The majority opinion noted that "in IEEPA's half century of existence, no President has invoked the statute to impose any tariffs, let alone tariffs of this magnitude and scope."Footnote 2
Still to be worked out
The economic implications of the decision are not immediately clear. Left uncertain, for example, is the issue of any refunds that may be due on the billions of dollars in tariffs already collected.Footnote 3 The ruling does not invalidate all the tariffs, only those imposed under the IEEPA, and the administration may explore other means to impose tariffs.Footnote 4
'Consumer stocks in particular may benefit, especially those with supply chains in Asia.' Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
Market reaction
At least initially, markets responded favorably to the news, with the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite posting early gains.Footnote 5 "Consumer stocks in particular may benefit, especially those with supply chains in Asia," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. While it's too early to know the long-term market impact, "the news does not alter our bull market thesis and overweight on equities." Investors should stay focused on the broader themes of strong corporate fundamentals and accelerating global economic growth, he adds.
For latest updates on tariffs, the economy and markets, tune in regularly to the CIO's Market Update audiocast.
Footnote 1 The Wall Street Journal, "Supreme Court strikes down Trump's tariffs," Feb. 20, 2026.

Footnote 2 Supreme Court of the United States, "Opinions of the Court – 2025," Feb. 20, 2026.

Footnote 3 The Wall Street Journal, "Supreme Court strikes down Trump's tariffs," Feb. 20, 2026.

Footnote 4 NBC News, "Supreme Court strikes down most of Trump's tariffs in a major blow to the president," Feb. 20, 2026.

Footnote 5 CNBC, "S&P 500 jumps after Supreme Court knocks down Trump's emergency tariffs: Live updates," Feb. 20, 2026.
February 17, 2026

What to expect from the latest government shutdown

The U.S. Government entered a partial shutdown at midnight on Friday, February 13, affecting continued funding for the Department of Homeland Security (DHS). The stumbling block: the inability of lawmakers to reach a consensus on potential reforms to Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP), which DHS runs.
This is the third such event in recent months. A four-day partial shutdown affecting numerous agencies ended Feb. 3,Footnote 1 and a sweeping, 43-day shutdown, the longest on record, ended last November.Footnote 2
'Despite the seriousness of the underlying issues and the potential for inconveniences, history suggests the shutdown will likely have little lasting impact on markets.' Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
How we got here
While the Feb. 3 agreement assured funding for most federal government operations, it funded DHS only through Feb. 13, giving Congress and the administration just days to resolve sharp differences in the wake of high-profile ICE confrontations in U.S. cities.Footnote 3 When those talks broke down, the latest shutdown was unavoidable.
What operations will be affected?
While ICE and CBP are at the center of the shutdown dispute, reports suggest they could be unaffected thanks to funding provided under the 2025 One Big Beautiful Bill Act.4 Other key DHS functions include the Federal Emergency Management Agency (FEMA), the Transportation Security Administration (TSA), the United States Coast Guard, and more.Footnote 5 While essential functions continue during government shutdowns, some workers may be furloughed while others work with no paychecks until the shutdown ends. Travelers could experience travel delays and other disruptions.Footnote 6
How will markets respond?
"Despite the seriousness of the underlying issues and the potential for inconveniences, the shutdown will likely have little lasting impact on markets and investors," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "History suggests that markets recover quickly from any volatility related to even extended shutdowns, so we emphasize sticking to your long-term investment strategy."
Tune in regularly to the CIO's Market Update audiocast for ongoing insights, and check back here for further updates on the shutdown and other market conditions.
Footnote 1 The New York Times, "Trump signs bill to reopen government," Feb. 3, 2026.

Footnote 2 PBS News, "Trump signs government funding bill, ending record 43-day shutdown," Nov. 13, 2026.

Footnote 3 The New York Times, "Trump signs bill to reopen government," Feb. 3, 2026.

Footnote 4 Cato Institute, "The One Big Beautiful Bill made ICE shutdown-proof and eroded fiscal norms," Feb. 10, 2026;
The Hill, "DHS faces weekend shutdown with ICE talks inching forward," Feb. 11, 2026.

Footnote 5 DHS, "Operational and support components," Jan. 28, 2026.

Footnote 6 CBS News, "Democrats reject latest White House offer on ICE reforms with Homeland Security hanging in the balance," Feb. 10, 2026.
January 28, 2026

The Federal Reserve holds steady on rates

As widely expected, The Federal Reserve (the Fed) made no move to lower the federal funds rate at its January 28 meeting. "We're in the middle of a rate-cutting cycle, which tends to be positive for economic growth and equities," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Yet after three cuts in 2025, most recently in December, the Fed will carefully analyze a range of economic data before determining when to resume cutting in the coming months, Hyzy believes.
'We believe the economy is gathering momentum, with inflation still above the Fed's 2% target.' Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
Balancing inflation and labor market concerns The Fed adjusts interest rates to balance its two primary objectives, full employment and controlled inflation. Lower rates stimulate the economy and hiring; higher rates tend to slow the economy, tamping down rising prices.
"We believe the economy is gathering momentum, with inflation still above the Fed's 2% target,"Footnote 1 says Hyzy. At the same time, he believes, "a softening labor market is clearly a concern," with the U.S. economy adding a lower-than-expected 50,000 jobs in December."Footnote 2 "This month's decision does not prevent the Fed from deciding to drop rates later in the year if that trend continues," Hyzy adds. And come May, a new Fed chair will enter the equation. "We currently expect two additional cuts in 2026."
Read "Plan ahead to take advantage of Fed rate cuts" for insights on how an ongoing lower-rate environment could affect your investments and financial life this year. For more market insights from the Chief Investment Office (CIO), tune in regularly to the CIO's Market Update audiocast.
Footnote 1 PBS, "Inflation cooled slightly in December but remains above Fed's target," Jan. 13, 2026.

Footnote 2 CNBC, "U.S. payrolls rose 50,000 in December, less than expected; unemployment rate falls to 4.4%," Jan. 9, 2026.

Next steps

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