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Market Volatility

April 25, 2018

4 Things That Could Keep the Markets Growing

WITH U.S. STOCKS FALLING by almost 2 percent, “equities around the world were pressured in the last couple of days,” says Chief Investment Officer Chris Hyzy in his latest audio, recorded earlier today.

Although reported first-quarter earnings have been strong, a number of factors are worrying investors. These include the rise of the 10 Year Treasury yield above 3%, higher commodity prices, and continued concerns over a possible trade war with China.

“Are Q1 earnings as good as it gets?” is the question on investors’ minds right now, says Hyzy. While it’s natural to step back and think about the implications of rising costs on growth, “we still expect double-digit equity returns from current levels in 2018,” he says.

Please read important disclosures below.*

What would it take to achieve that level of overall growth? Hyzy points to the following:

  1. “Corporate profits are going to have to outperform consensus expectations for the remainder of the year.”
  2. “10 year Treasury yields need to stay below 3.5 percent.”
  3. “Commodity prices (namely oil) cannot rise much sharper from current levels.”
  4. “Trade negotiations with China need to turn for the better.”

“It’s a lot to ask,” he admits, “but with close to 20 percent earnings growth expected, a patient and transparent Fed, and emerging market buying power still gaining strength, we think there is still time left for the bull market.”

Listen to the audio above for key insights on how investors can respond to this phase of the market cycle.

All information is as of 4/25/18 and subject to change.

April 9, 2018

Investors Want to Know: How Long Could Volatility Last?

“THE NOISE IN THE MARKETS is at sky-high level,” says Chief Investment Officer Chris Hyzy in this audio recorded at the end of a week that saw the markets continue their dizzying up-and-down trajectory. Friday’s dip was precipitated by an escalating trade war between the U.S. and China, and hawkish comments made by the Federal Reserve Chair on interest rates. 

“As a result, short term market participants are understandably nervous, and long term investors are staying on the sidelines,” says Hyzy.  Elevated volatility, he believes, could continue through June, “until North American Free Trade Agreement (NAFTA) and China trade negotiations are resolved and equity prices find their bottom.” Investors should expect to see volatility spike, depending on the news of the day on any given day during that time. Still, he emphasizes, “it is too premature to suggest the bull market cycle is ending and that a recession is around the corner.”

Look for corporate earnings announcements “to be the catalyst that should ultimately stabilize the markets,” Hyzy says.  “Strong profits, a clear and stable interest rate policy and a de-escalation in the trade equation should re-establish the equity uptrend we experienced at the beginning of the year.”

Listen to the audio below for insights on how you can respond to what’s likely to be a continuing period of market uncertainty.

Chris Hyzy on Market Volatility

Audio Record: April 6, 2018 @4:15pm

Since this bull market is almost 10 years old and information noise is at sky-high levels-particularly when the noise at this point is around trade, which is a primary driver of global economic growth, as well as interest rates, which helps determine the price of capital and assets in general. It is quite natural to expect rolling concerns. We think the concerns are healthy to keep in mind the further we travel through this cycle, but we do feel it is too premature, at this point, to suggest the cycle is ending and a recession is around the corner in 2018.

Now once again, we’ve experienced further negative volatility in recent days with the major market averages close to retesting their February lows. The latest concerns are more of the same. Further potential imposition of tariffs on China, this time totaling close to $100 if not just over $100 billion. Retaliatory trade measures back from China on some of America’s strategic exports and now once again, more hawkish interest rate policy comments.

As a result, short-term market participants are nervous and have been reacting to the saber rattling. Long-term investors have been subtly moving to the sidelines or simply staying on the sidelines. We have seen this most recently in the equity flow trends that were announced this week.

Give these concerns, what’s our view?

We still expect elevated volatility to remain in the coming weeks and perhaps through mid-year. Volatility can also spike intraday given the news of the day.

Secondly, uncertainty on trade and interest rate policy should also remain. The North American Free Trade Agreement and China negotiations with the United States should continue through May and into June.

Bond yields should stay stuck in a range and equity prices in our opinion are still trying to find a bottom as economic and market fundamentals ultimately provide that catalyst to reestablish the equity market trend. And finally, 3 Ps are important to keep in mind. Number 1, profits. 2, policy, and 3, positioning. These should all continue to take their turn on what matters most to investors throughout the rest of 2018. Now in our view, strong profits are needed. A clear and stable interest rate policy is also needed, particularly as it relates to tame wage inflation and a de-escalation is needed in the trade equation to change investor sentiment for the better and again, reestablish that equity uptrend we experienced at the beginning of the year.

In summary, in bull markets that are in their late stage environments, market bottoms traditionally take a few months to occur. Right now, we believe we are currently in that process, which is about eight to nine weeks already in. The catalysts that ultimately stabilizes the market and supports higher equity prices is corporate earnings, in our view. Valuations are now back to more normal levels and in the coming weeks, these earnings announcements which generally start around April 9th and continue to culminate throughout the rest of April, should provide that stabilizing force as we expect investor flows to once again come back into equities, given the high profit growth that we anticipate. We continue to

believe that weak market periods represent a rebalancing opportunity for the long-term investor. Stay the course.

IMPORTANT INFORMATION

Investing involves risk, including the possible loss of principal. No investment program is risk-free, and a systematic investing plan does not ensure a profit or protect against a loss in declining markets. Any investment plan should be subject to periodic review for changes in your individual circumstances, including changes in market conditions and your financial ability to continue purchases.

It is not possible to invest directly in an index.

Asset allocation, diversification, dollar cost averaging and rebalancing do not ensure a profit or protect against loss in declining markets.

Past performance is no guarantee of future results.

The opinions expressed are those of the Global Wealth & Investment Management Chief Investment Office (GWIM CIO) only and are subject to change. While some of the information included draws upon research published by BofA Merrill Lynch Global Research, this information is neither reviewed nor approved by BofA Merrill Lynch Global Research. This information and any discussion should not be construed as a personalized and individual recommendation, which should be based on your investment objectives, risk tolerance, and financial situation and needs. This information and any discussion also is not intended as a specific offer by Merrill Lynch, its affiliates, or any related entity to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service. Investments and opinions are subject to change due to market conditions and the opinions and guidance may not be profitable or realized. Any information presented in connection with BofA Merrill Lynch Global Research is general in nature and is not intended to provide personal investment advice. The information does not take into account the specific investment objectives, financial situation and particular needs of any specific person who may receive it. Investors should understand that statements regarding future prospects may not be realized.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

The investments discussed have varying degrees of risk. Some of the risks involved with equities 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 high-yield bonds may be subject to greater market fluctuations and risk of loss of income and principal than securities in higher rated categories. Investments in foreign securities involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates, and risk related to renting properties, such as rental defaults. 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.

Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation (BofA Corp.). Merrill Edge® is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform.

Global Wealth & Investment Management is a division of Bank of America Corporation (“BofA Corp.”), Merrill Lynch Wealth Management, Merrill Edge®, U.S. Trust and Bank of America Merrill Lynch are affiliated sub-divisions within Global Wealth & Investment Management, Bank of America Merrill Lynch.

The Private Banking and Investment Group 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 Group's Private Wealth Advisors through MLPF&S, a registered broker-dealer and registered investment adviser. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill Lynch's obligations will differ among these services. Investments involve risk, including the possible loss of principal investment.

U.S. Trust operates through Bank of America, N.A., and other subsidiaries of BofA Corp.

Bank of America, N.A., Member FDIC.

Investment products:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

     ARGBYBL9

Please read important disclosures below.*

It is too premature to suggest the bull market cycle is ending and that a recession is around the corner

Chief Investment Officer Chris Hyzy

April 2, 2018

6 Reasons to Believe This Correction Won’t Last  

THE SECOND QUARTER STARTED today in dramatic fashion with the Dow Jones, S&P 500 and Nasdaq indices moving into correction territory—down 10% or more from their highs for the year—prompted by concerns over the tech sector and trade disagreements. In this audio cast, Chief Investment Officer Chris Hyzy outlines 6 economic factors that, he believes, will help to support a rebound as earnings season begins next week. 

“In our view, as we work through earnings season, the S&P 500 is likely to reverse the recent trend and head higher,” Hyzy says. “Business confidence should remain at record levels heading into the summer months, and tax reform and the repatriation of overseas capital should begin to filter through into the broader economy in a more assertive way.” He encourages investors to look at volatility as a “buying and rebalancing opportunity.” For more of his insights, listen to the audio cast below.

Chris Hyzy

Bank of America

04/03/2018

12:30 pm ET

Chris Hyzy: Hello, this is Chris Hyzy. Given the latest market action, I wanted to provide our latest thoughts. Investors have been searching for positive catalysts to break the consistent flow of concerns in the last few weeks, and the start of the second quarter is no different in our view. Markets are selling off to start the second quarter with the technology sector pressuring the major industries once again. A lack of positive development is mixed with geopolitical and individual corporate issues are keeping portfolio flows in the sidelines. Currently, the DOW, the S&P 500 and NASDAQ are all in correction territory which indicates the indices are down 10% or more from their highs for the year. The S&P 500 and the DOW industrial average closed the first quarter down approximately 1% to 2% after rallying around 8% in January alone. International markets mainly Europe and Japan underperformed the US’ tariff and trade concerns developed in March. The dollar was slightly weak against most major currencies, oil rallied, gold finished up over 1%, yields rose earlier in the quarter, but has since backed off with the US ten-year now at about 2.73% from a high of around 2.95% and the third year is also backed down below 3%. So, what is the broader market and economic backdrop look like now?

Number one, economic growth should increase throughout this year as capital expenditures rise which helps productivity and helps keep inflation from getting to levels that would worry the Fed, and consumer spending should also remain healthy for the rest of the year in our view. Consumer business confidence as well as overall confidence should remain at record levels heading into the summer months. Job growth should also remain supportive of slightly higher wage growth. Tax reform and repatriation of overseas capital should begin to filter through into the broader economy in a more transparent and assertive way. Emerging markets are still earlier in their growth cycle, which should help further boost durable goods orders in manufacturing industries overall, and lastly, number six, higher nominal growth helps produce higher cash flows which we expect this to gather momentum each quarter for the remainder of the year. Secondarily, when can a short-term catalyst develop in our opinion? We believe profits and higher cash flows starting in the US still remain the catalyst that can break the recent negative trend. Earnings announcements begin the week of April 9PthP and key industrial, financial, and technology companies announced throughout the rest of April. As we work through earnings season, the S&P 500 is likely to reverse the recent trend in head higher in our view. Some key technical levels to keep in mind remain the 200 day moving average, which is predominantly a short term indicator. However, it’s around 25, 36 on the S&P 500. That’s the level that we reached earlier in February during the initial move lower in equities and we are only approximately 2% away from the current levels as we speak right now.

What can we expect in the short term overall? We believe we are in the vacuum of positive news environment with a higher level of volatility and one that incorporates a repricing of risk and portfolios as we enter the late stage in the economy. Investors are searching for more transparent signs that markets are close to their bottoms in the short term and that profits are the engine that allows investors to increase risk in their portfolios. Thirdly, we expect rates to grind higher, not sharply increase, as the Fed patiently normalizes policy and inflation slowly ticks higher. Fourth, we prefer high quality investments across all asset classes at this stage in the cycle. We also view weak episodes like this one are emblematic of a marketplace trying to build a bottom. We would use these types of periods as buying opportunities or rebalancing opportunities in our areas of emphasis. We expect US equities and emerging markets to maintain their leadership once the uptrend reasserts itself, and in terms of sectors, technology and financial should also lead once again in our opinion. Our main equity team remains high quality dividend growth ideas across markets, sectors, indices, and managers. In fixed income, we prefer high quality investments as well across all segments and we still prefer neutral to slightly lower duration. Lastly, our top portfolio team also remains, which is a high level of diversification and more active rebalancing as volatility stays elevated. In our opinion, market corrections tend to latch on to negative headlines until a positive fundamental catalyst breaks the feedback loop. Although we recognize there are risks such as possible further protection as trade measures, individual corporate regulatory issues or Libor Yields that continue to increase more sharply than expected, we believe it is too early for this full cycle to end. Thank you.

IMPORTANT INFORMATION

Investing involves risk, including the possible loss of principal. No investment program is risk-free, and a systematic investing plan does not ensure a profit or protect against a loss in declining markets. Any investment plan should be subject to periodic review for changes in your individual circumstances, including changes in market conditions and your financial ability to continue purchases.

It is not possible to invest directly in an index.

Asset allocation, diversification, dollar cost averaging and rebalancing do not ensure a profit or protect against loss in declining markets.

Past performance is no guarantee of future results.

The opinions expressed are those of the Global Wealth & Investment Management Chief Investment Office (GWIM CIO) only and are subject to change. While some of the information included draws upon research published by BofA Merrill Lynch Global Research, this information is neither reviewed nor approved by BofA Merrill Lynch Global Research. This information and any discussion should not be construed as a personalized and individual recommendation, which should be based on your investment objectives, risk tolerance, and financial situation and needs. This information and any discussion also is not intended as a specific offer by Merrill Lynch, its affiliates, or any related entity to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service. Investments and opinions are subject to change due to market conditions and the opinions and guidance may not be profitable or realized. Any information presented in connection with BofA Merrill Lynch Global Research is general in nature and is not intended to provide personal investment advice. The information does not take into account the specific investment objectives, financial situation and particular needs of any specific person who may receive it. Investors should understand that statements regarding future prospects may not be realized.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

The investments discussed have varying degrees of risk. Some of the risks involved with equities 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 high-yield bonds may be subject to greater market fluctuations and risk of loss of income and principal than securities in higher rated categories. Investments in foreign securities involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates, and risk related to renting properties, such as rental defaults. 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.

Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation (BofA Corp.). Merrill Edge® is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform.

Global Wealth & Investment Management is a division of Bank of America Corporation (“BofA Corp.”), Merrill Lynch Wealth Management, Merrill Edge®, U.S. Trust and Bank of America Merrill Lynch are affiliated sub-divisions within Global Wealth & Investment Management, Bank of America Merrill Lynch.

The Private Banking and Investment Group 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 Group's Private Wealth Advisors through MLPF&S, a registered broker-dealer and registered investment adviser. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill Lynch's obligations will differ among these services. Investments involve risk, including the possible loss of principal investment.

U.S. Trust operates through Bank of America, N.A., and other subsidiaries of BofA Corp.

Bank of America, N.A., Member FDIC.

Investment products:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

ARCNY9V6

Please read important disclosures below.*

In our view, as we work through earnings season, the S&P 500 is likely to reverse the recent trend and head higher. 

Chief Investment Officer Chris Hyzy

March 23, 2018

Navigating the Sharp Edges of a ‘Saw Tooth’ Market

A NUMBER OF NEWS EVENTS CONVERGED to roil the markets this week: The announcement of China tariffs—and China’s anticipated response—heightened fears of a trade war. The tariffs came on the heels of a rate hike, signaling a slightly more hawkish tone from new Fed leadership. Earlier in the week, disturbing privacy disclosures bashed tech—the leadership sector over the past year. A bit of positive news rounded out the week, when Congress passed a $1.3 trillion spending bill, in hopes of averting a government shutdown at midnight. 

Various volatility charts

Past performance does not guarantee future results. 

Look beyond short-term, news-driven volatility. “Stay the course and focus on your goals.”

Chris Hyzy, Chief Investment Officer, Bank of America Global Wealth & Investment Management

“Volatility will likely remain a fact of life for investors this year, as a saw tooth market continues to seek a bottom and investors look for more positive signals,” says Chris Hyzy, Chief Investment Officer for Bank of America Global Wealth & Investment Management. “ Despite this week’s correction, we continue to believe that the fundamentals are good. They’re still gathering momentum, and we maintain our 3000 year-end target on the S&P 500,” notes Hyzy.

He encourages investors to look beyond short-term, news-driven volatility. “Stay the course and focus on your goals,” he says. And be sure to reach out to your advisor whenever you have questions about current market conditions—or want to review your asset allocation in light of your current tolerance for risk.

March 2, 2018

What to Watch for after this Week's 'Tariff Tantrum'

A NUMBER OF NEWS EVENTS CONVERGED to roil the markets this week: The announcement of China tariffs—and China’s anticipated response—heightened fears of a trade war. The tariffs came on the heels of a rate hike, signaling a slightly more hawkish tone from new Fed leadership. Earlier in the week, disturbing privacy disclosures bashed tech—the leadership sector over the past year. A bit of positive news rounded out the week, when Congress passed a $1.3 trillion spending bill, averting a government shutdown at midnight. 

Read the CIO team's "Investment Insights: The Latest: Tariff Tantrum" for insights into recent volatility and the outlook for the economy in the months to come.

February 14, 2018

Focus on the Fundamentals: "They've Rarely been Better"

IS THERE SOMETHING WRONG WITH OUR ECONOMY? It's an understandable question given the current volatility. But the fundamentals tell a different story, according to Joseph P. Quinlan, Head of Market & Thematic Strategy, and Lauren J. Sanfilippo, Vice President and Research Analyst, from the GWIM Chief Investment Office (CIO).

Despite the ongoing market turbulence, "in our analysis we find the fundamentals of the U.S. and global economy have rarely been better," they write in this week's Capital Market Outlook from the CIO team. In the U.S. "stronger economic growth, the tailwinds from tax reform and a currently weaker U.S. dollar all point to higher earnings for the S&P 500."

The current bout of volatility was touched off by a positive January payroll report, which stoked fears of rising consumer prices and interest rates. But those inflationary pressures are building for the right reasons, say Quinlan and Sanfilippo. They reflect the underlying strength of the economy.

For more insights, read "Quiet Time May Be Over But in Our View Not the Market Rally," found on page 3 of this week's Capital Market Outlook from the GWIM Chief Investment Office.

February 9, 2018

Why Volatile Markets Call for a Long-term Perspective

FOR INVESTORS, THE BEST RESPONSE TO A WEEK OF UNSETTLING VOLATILITY is to stay the course, says Chris Hyzy, Chief Investment Officer for Bank of America Global Wealth & Investment Management. "While the declines were dramatic, we believe stocks were overdue for a pullback following the record gains we've seen through 2017 and into January of this year."

In the video below, Hyzy offers further insights into the forces behind the recent correction. Because the economy remains fundamentally strong, "investors who maintain a long-term perspective are best positioned to capture new growth opportunities as they emerge," he adds. Watch the video, then read the latest Investment Insights from the Chief Investment Office, "Stay the Course." And be sure to reach out to your advisor to discuss your investments in the current market environment.

Chris Hyzy

 

Bank of America

 

04/03/2018

 

12:30 pm ET

 

Chris Hyzy: Hello, this is Chris Hyzy. Given the latest market action, I wanted to provide our latest thoughts. Investors have been searching for positive catalysts to break the consistent flow of concerns in the last few weeks, and the start of the second quarter is no different in our view. Markets are selling off to start the second quarter with the technology sector pressuring the major industries once again. A lack of positive development is mixed with geopolitical and individual corporate issues are keeping portfolio flows in the sidelines. Currently, the DOW, the S&P 500 and NASDAQ are all in correction territory which indicates the indices are down 10% or more from their highs for the year. The S&P 500 and the DOW industrial average closed the first quarter down approximately 1% to 2% after rallying around 8% in January alone. International markets mainly Europe and Japan underperformed the US’ tariff and trade concerns developed in March. The dollar was slightly weak against most major currencies, oil rallied, gold finished up over 1%, yields rose earlier in the quarter, but has since backed off with the US ten-year now at about 2.73% from a high of around 2.95% and the third year is also backed down below 3%. So, what is the broader market and economic backdrop look like now?

 

Number one, economic growth should increase throughout this year as capital expenditures rise which helps productivity and helps keep inflation from getting to levels that would worry the Fed, and consumer spending should also remain healthy for the rest of the year in our view. Consumer business confidence as well as overall confidence should remain at record levels heading into the summer months. Job growth should also remain supportive of slightly higher wage growth. Tax reform and repatriation of overseas capital should begin to filter through into the broader economy in a more transparent and assertive way. Emerging markets are still earlier in their growth cycle, which should help further boost durable goods orders in manufacturing industries overall, and lastly, number six, higher nominal growth helps produce higher cash flows which we expect this to gather momentum each quarter for the remainder of the year. Secondarily, when can a short-term catalyst develop in our opinion? We believe profits and higher cash flows starting in the US still remain the catalyst that can break the recent negative trend. Earnings announcements begin the week of April 9PthP and key industrial, financial, and technology companies announced throughout the rest of April. As we work through earnings season, the S&P 500 is likely to reverse the recent trend in head higher in our view. Some key technical levels to keep in mind remain the 200 day moving average, which is predominantly a short term indicator. However, it’s around 25, 36 on the S&P 500. That’s the level that we reached earlier in February during the initial move lower in equities and we are only approximately 2% away from the current levels as we speak right now.

What can we expect in the short term overall? We believe we are in the vacuum of positive news environment with a higher level of volatility and one that incorporates a repricing of risk and portfolios as we enter the late stage in the economy. Investors are searching for more transparent signs that markets are close to their bottoms in the short term and that profits are the engine that allows investors to increase risk in their portfolios. Thirdly, we expect rates to grind higher, not sharply increase, as the Fed patiently normalizes policy and inflation slowly ticks higher. Fourth, we prefer high quality investments across all asset classes at this stage in the cycle. We also view weak episodes like this one are emblematic of a marketplace trying to build a bottom. We would use these types of periods as buying opportunities or rebalancing opportunities in our areas of emphasis. We expect US equities and emerging markets to maintain their leadership once the uptrend reasserts itself, and in terms of sectors, technology and financial should also lead once again in our opinion. Our main equity team remains high quality dividend growth ideas across markets, sectors, indices, and managers. In fixed income, we prefer high quality investments as well across all segments and we still prefer neutral to slightly lower duration. Lastly, our top portfolio team also remains, which is a high level of diversification and more active rebalancing as volatility stays elevated. In our opinion, market corrections tend to latch on to negative headlines until a positive fundamental catalyst breaks the feedback loop. Although we recognize there are risks such as possible further protection as trade measures, individual corporate regulatory issues or Libor Yields that continue to increase more sharply than expected, we believe it is too early for this full cycle to end. Thank you.

 

IMPORTANT INFORMATION

Investing involves risk, including the possible loss of principal. No investment program is risk-free, and a systematic investing plan does not ensure a profit or protect against a loss in declining markets. Any investment plan should be subject to periodic review for changes in your individual circumstances, including changes in market conditions and your financial ability to continue purchases.

 

It is not possible to invest directly in an index.

 

Asset allocation, diversification, dollar cost averaging and rebalancing do not ensure a profit or protect against loss in declining markets.

 

Past performance is no guarantee of future results.

 

The opinions expressed are those of the Global Wealth & Investment Management Chief Investment Office (GWIM CIO) only and are subject to change. While some of the information included draws upon research published by BofA Merrill Lynch Global Research, this information is neither reviewed nor approved by BofA Merrill Lynch Global Research. This information and any discussion should not be construed as a personalized and individual recommendation, which should be based on your investment objectives, risk tolerance, and financial situation and needs. This information and any discussion also is not intended as a specific offer by Merrill Lynch, its affiliates, or any related entity to sell or provide, or a specific invitation for a consumer to apply for, any particular retail financial product or service. Investments and opinions are subject to change due to market conditions and the opinions and guidance may not be profitable or realized. Any information presented in connection with BofA Merrill Lynch Global Research is general in nature and is not intended to provide personal investment advice. The information does not take into account the specific investment objectives, financial situation and particular needs of any specific person who may receive it. Investors should understand that statements regarding future prospects may not be realized.

 

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

 

The investments discussed have varying degrees of risk. Some of the risks involved with equities 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 high-yield bonds may be subject to greater market fluctuations and risk of loss of income and principal than securities in higher rated categories. Investments in foreign securities involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates, and risk related to renting properties, such as rental defaults. 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.

 

Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation (BofA Corp.). Merrill Edge® is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform.

 

Global Wealth & Investment Management is a division of Bank of America Corporation (“BofA Corp.”), Merrill Lynch Wealth Management, Merrill Edge®, U.S. Trust and Bank of America Merrill Lynch are affiliated sub-divisions within Global Wealth & Investment Management, Bank of America Merrill Lynch.

The Private Banking and Investment Group 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 Group's Private Wealth Advisors through MLPF&S, a registered broker-dealer and registered investment adviser. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill Lynch's obligations will differ among these services. Investments involve risk, including the possible loss of principal investment.

 

U.S. Trust operates through Bank of America, N.A., and other subsidiaries of BofA Corp.

Bank of America, N.A., Member FDIC.

Investment products:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

ARCNY9V6

Please read important disclosures below.*

February 9, 2018

How to respond to market Volatility? Stay the Course

After a year of steadily rising markets, the current volatility can seem like jarring mid-air turbulence during an overseas flight. As the markets struggle to regain balance, the key for investors is to avoid overreacting and to focus on your long-term objectives, says Chris Hyzy, Chief Investment Officer for Bank of America Global Wealth & Investment Management.

What's behind the volatility? If anything, the market drop may be the result of too much good news, Hyzy notes in a new CIO Investment Insights, "The Latest: Darkest Before the Dawn." Amid higher earnings for businesses, solid fundamentals, and enthusiasm over the new tax law, investment markets became overextended—leading to fears about inflation and rising interest rates. A change in leadership at the Federal Reserve, from Janet Yellen to Jerome Powell, added to the uncertainties. Meanwhile, rapid selling by complex quantitative investment programs drove markets down further.

What does this mean for you? While the calm markets of 2017 may have lulled investors into assuming otherwise, volatility is an inevitable and even normal part of markets and investing, Hyzy suggests. Over the past 30 years, U.S. stocks have averaged three pullbacks per year of 5 percent or more, according to BofA Merrill Lynch Global Research.

Graph showing market pullbacks.

The good news is that the fundamentals of the economy remain strong, with corporate profits expected to rise approximately 16 percent, Hyzy notes. In other words, while ongoing volatility may be a fact of life, investors who stay the course and take a long-term view may find that downturns—however unsettling—represent an opportunity to add to a diversified portfolio.

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