Market briefs

Breaking insights on the economy, market volatility, policy changes and geopolitical events
September 17, 2025

The Fed rate cut: A cue to review your investments

The Federal Reserve (the Fed) lowered the federal funds rate by .25% on Wednesday, September 17, marking the first Fed rate cut since December 2024. "The Fed has signaled the possibility of two more cuts before year end, with additional cuts possible in 2026,"Footnote 1 says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
Is a weakening economy behind the cut?
The Fed typically lowers rates to jumpstart an economy showing signs of slowing. The economy added only 22,000 jobs in August and unemployment, a key concern for the Fed, rose.Footnote 2 That's what prompted the much-anticipated rate cut, even though inflation, the Fed's other key concern, remains higher than its 2% target.
In this case, however, the economic news isn't all bad. Despite a softening labor market and sticky inflation, "consumers are spending, corporate earnings and capital expenditures remain strong and equity markets have been reaching new highs," says Hyzy. "With a period of declining rates likely to follow today's rate cut, investors may want to consider making some portfolio adjustments."
Lower rates = higher returns?
While markets rallied in advance of the September cut, there are strong indications of additional room to grow, Hyzy believes. In addition to easier access to capital stemming from an easing rate environment, companies are poised to benefit from a host of tax incentives contained in this year's "One Big Beautiful Bill."
With a period of declining rates likely to follow today's rate cut, investors may want to consider making some portfolio adjustments. Chris Hyzy Chief Investment Officer, Merrill and Bank of America Private Bank
3 moves for investors to consider now
Lock in longer-term bond rates before they fall. "Putting money into longer-term bonds before rates drop further could help you diversify equity risk with higher, more stable income," Hyzy says. For more insights on how your bond holdings could be affected by an easing rate environment, watch "What do Fed rate cuts mean for the bond market?"
Look for potential buying opportunities. "For growth, we would view any temporary market weakness as an invitation to strategically invest in equities, especially if you have excess cash," he says. The declining rate environment may create potential opportunities in areas such as real estate, industrials and financials.
Take a look at small-cap companies and infrastructure stocks. Small caps may benefit from easier access to capital. Meanwhile, says Hyzy, the massive buildout of data centers to power artificial intelligence could also create long-term opportunities in infrastructure.
As always, consider diversifying across and within asset classes, and keep in mind that any portfolio changes should align with your long-term goals, Hyzy advises. For help staying on top of the markets, tune in weekly to the CIO's Market Update audiocast, and check here for updates on interest rates and other economic and market conditions.
Footnote 1 CNBC, "Fed approves quarter-point interest rate cut and sees two more coming this year," September 17, 2025.

Footnote 2 CNBC,"Payrolls rose 22,000 in August, less than expected in further sign of hiring slowdown," Sept. 5, 2025.

September 15, 2025

Can India reclaim emerging markets leadership?

After headlining the early 2020s as investors’ favorite emerging market (EM) economy, India in 2025 has lagged the broader universe of EM stocks by about 18%.Footnote 1 "And while the MSCI India Index outperformed the Chinese MSCI Index by nearly 100% between 2020 and 2024,Footnote 2 that script has flipped with Chinese equities soaring in 2025 and India flattening," says Ariana Chiu, wealth management analyst in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank.
With India relying on the U.S. as a key source of foreign investment and destination for Indian exports, improving relations with the U.S. would be a welcome development. Ariana Chiu, wealth management analyst, Chief Investment Office, Merrill and Bank of America Private Bank.
A recent CIO Capital Market Outlook report (PDF), examines some reasons for India's tough year for equities, its prospects for turning things around, and what this means for investors.
What's behind India's struggles?
"Tariffs are creating headwinds," Chiu says. Most notably, the United States recently doubled its tariffs on India to a steep 50% in response to India's purchases of Russian oil.Footnote 3 "One reason investors had favored India was that, unlike China, it was not thought to be in the crosshairs of U.S. protectionism," she adds.
Another factor: "Despite hopes that India would emerge as a supply chain alternative to China, its share of global manufacturing has barely budged over the past 15 years," Chiu notes.Footnote 4 "Meanwhile, China's technology strength has helped drive that country's improving equity momentum."
Reasons for optimism
"Despite challenges, India remains the world’s fastest growing major economy," Chiu says. The country's real GDP growth reached 7.8% in the second quarter of 2025, higher than many economists had expected.2024,Footnote 5 "With India relying on the U.S. as a key source of foreign investment and destination for Indian exports, improving relations with the U.S. would be a welcome development," she adds.
How should investors respond?
Considering the ongoing growth in emerging market economies, "We believe a strategic allocation to EM equities can be appropriate in a well-diversified portfolio," Chiu says. Investors may want to consider funds with active managers closely following the evolving trade picture and country-by-country outlook, she adds. An advisor can help you determine whether EM equities are a good fit for your portfolio and long-term goals. If you make investment decisions on your own, on-line screeners can help you identify EM opportunities. Learn more about Merrill Edge Self-Directed Investing screeners under "Research" (client login required).
Read the full Capital Market Outlook (PDF) report. Listen to our latest CIO Market Update audiocast, and check here for regular updates on tariffs and other economic and market conditions.
Footnote 1 Bloomberg. Data as of Sept. 3, 2025.

Footnote 2 Bloomberg. Data as of Sept. 3, 2025.

Footnote 3 Reuters, "Trump's doubling of tariffs hits India, damaging ties" Aug. 27, 2025.

Footnote 4 United Nations. Data through 2024, as of September 2025.

Footnote 5 CNBC, "India's economy grows at faster-than-expected 7.8% in the June quarter," Aug. 27, 2025.
August 27, 2025

Good, bad, ugly: What tariffs could mean for the economy and investors

Since announcing steep tariffs on most countries in early April, the United States has modified or retracted some tariffs and announced new ones, with varying responses from abroad.Footnote 1 For investors, tariff uncertainties have raised questions on an array of topics: inflation, corporate earnings, stock performance, even the potential for an all-out trade war.
Although international trade policies are likely to keep evolving, some possible effects are emerging from the noise. In a recent issue of the Capital Market Outlook (PDF), the Chief Investment Office (CIO) examined the risks, potential benefits and reasons for long-term optimism on the U.S. economy.
Good: A rebalancing of world trade
"The global trading system has long been overdependent on U.S. buyers," says Joe Quinlan, head of Market Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank. With just 4.7% of world population, the U.S. accounted for 13.5% of merchandise imports in 2024, according to the International Monetary Fund.
"Over time, higher tariffs may encourage export-oriented countries such as China and Germany to focus more on internal consumption," Quinlan says, bringing trade into greater balance and creating opportunities for U.S. goods and services exports. Higher tariffs could also generate new revenue for the federal government and could encourage more foreign firms to manufacture in the U.S., he says.
U.S. companies have shown remarkable resilience in trimming costs, using excess inventory and finding cost-saving innovations. Ariana Chiu, wealth management analyst, Chief Investment Office, Merrill and Bank of America Private Bank.
Bad: U.S. companies feeling the pressure
"Despite those potential long-term benefits, tariffs are already hitting U.S. corporate bottom lines in industries as diverse as autos, food, clothing and construction," says Ariana Chiu, wealth management analyst in the CIO. While many companies have thus far avoided passing increased costs on to consumers, 2025 could still see higher consumer prices and a dent in corporate earnings.
On the positive side, "U.S. companies have shown remarkable resilience in trimming costs, using excess inventory and finding cost-saving innovations," Chiu adds. "And a weaker dollar this year has helped offset costs for U.S. multinational companies."
Ugly: The (small) risk of a global trade war
The April U.S. tariff announcement sparked fears of a global trade war — especially after China and Canada announced steep retaliatory measures. "Canada and China have since reconciled with the U.S. to avoid a full-blown trade war. Other countries, while threatening retaliation, didn't," Chiu says. U.S. markets have rallied from their April slump, and many global markets have hit new highs in 2025, she notes. While a debilitating trade war could still occur, that threat has greatly diminished, Chiu adds.
What this means for investors
"For all of the risks, we're constructive on the U.S. economy and earnings," Quinlan says. Consumers remain resilient and capital expenditures, already rising, should benefit from fiscal stimulus in the federal "One Big Beautiful Bill." As part of well-diversified portfolios built around their long-term goals, he suggests, investors may want to consider adding U.S. stocks, especially when tariff-related "squalls or scares" create buying opportunities.
Read the full Capital Market Outlook (PDF) report. Listen to our latest CIO Market Update audiocast, and check here for regular updates on tariffs and other economic and market conditions.
Footnote 1 The New York Times, "A Timeline of Trump's On-Again, Off-Again Tariffs," Aug. 7, 2025.
August 18, 2025

With U.S. markets rebounding, are global stocks still as attractive?

International stocks sparked fresh interest among investors in early 2025, climbing just as U.S. markets struggled amid concerns over tariff policies.Footnote 1 Lately, the gap is closing. "Since mid-April, markets seem to have moved past peak tariff uncertainty and U.S. stocks have rebounded," says Ehiwario Efeyini, senior market strategy analyst, Chief Investment Office (CIO), Merrill and Bank of America Private Bank. So, should investors still consider global stocks?
Europe's aerospace and defense industry has been a top-performer globally in 2025, returning close to 65% as of the end of July. Footnote 2. Ehiwario Efeyini, senior market strategy analyst, Chief Investment Office, Merrill and Bank of America Private Bank
"This is a relative rather than absolute story," Efeyini says. "While their big lead has been eroded, international stocks have nonetheless climbed to new highs this year and can still play an important part in a diversified portfolio." But keep in mind that global markets are complex and varied. A recent CIO Capital Market Outlook (PDF) report discusses some current potential opportunities and risks across various industries in developed and emerging economies. Some highlights:
Emerging markets: Technology
One reason for the U.S. market rebound since early April has been the surge in information technology, Artificial Intelligence and other technologies. "Those same forces are lifting countries such as South Korea, Taiwan and, to a lesser extent, China," Efeyini says. "Developed markets such as the eurozone, Japan and the UK have considerably lower exposure to tech."
Europe: Defense and industrials
Spurred by a surge in defense spending, "Europe's aerospace and defense industry has been a top-performer globally in 2025, returning close to 65% as of the end of July," Efeyini says.Footnote 2 "The so-called Readiness EU package unveiled in March allocates €800 billion annually to defense spending over four years, with the aim of reaching 3% of GDP by 2030." Germany, meanwhile, has amended its constitution to enable greater spending on defense, clean energy, transportation and digital infrastructure — all of which should support EU industrials.
China and Japan: Potential headwinds
In China — for many years the world's greatest growth story — a sluggish real estate market is putting a drag on everything from Chinese fixed investment to household balance sheets and consumer spending, Efeyini notes. While China is leaning into areas such as advanced manufacturing, robotics and clean energy, these may not be enough to overcome the current economic weakness.
Japan, which battled deflation since the early 1990s, now faces risks from inflation and the erosion of household real income. Core inflation has been running at 3.3% recently, well above Japan's 2% target.Footnote 3 Amid fears of new inflation spikes, "Japan has underperformed other major international markets this year," he points out.
Parting thoughts: International stocks and your portfolio
"On balance, we favor U.S. stocks over international, especially given the recent momentum of U.S. markets," Efeyini notes. "Yet international stocks can still help diversify a portfolio, and even with their strong performance in 2025, they may offer relative value compared with U.S. stocks." An advisor, if you work with one, can help you determine what role international stocks could play in your portfolio, he adds.
For the latest insights on equities, read the weekly CIO Capital Market Outlook (PDF). Listen to the CIO Market Update audiocast, and check here for regular updates on U.S. and global economic and market conditions.
Footnote 1 CNBC, "International stocks are ahead of the U.S. so far this year — how to add them to your portfolio," June 6, 2025.

Footnote 2 MSCI Europe Aerospace and Defense Index as of July 31, 2025; Bloomberg as of July 31, 2025.

Footnote 3 Statistics Bureau of Japan.
July 25, 2025

The new bill: How could it affect your taxes?

A sweeping new bill, passed July 1 by Congress and signed into law on Independence Day, will affect the way millions of U.S. taxpayers claim personal deductions, transfer wealth, pay taxes on their businesses and more.
To help you better understand and plan for these changes, a recent Tax Alert (PDF) from the Chief Investment Office (CIO) National Wealth Strategies team details the potential impact for individuals and small businesses. Here are some of the new act's most consequential provisions related to taxes:
The new legislation locks in the historically high gift, estate and generation-skipping tax exemptions that were due to drop sharply at the end of 2025. Chief Investment Office, National Wealth Strategies Team.
For individuals
  • Maintains the gift, estate and generation-skipping tax exemptions. The legislation locks in the historically high exemptions that were due to drop sharply at the end of 2025, returning to the levels before the 2017 Tax Cuts and Jobs Act (TCJA). The 2026 exemption will stand at $15 million per individual and $30 million for couples, to be revised annually for inflation. The absence of a "sunset" date for gift and estate tax exemptions could remove some guesswork from long-term estate planning.
  • Raises state and local and standard deductions. Through 2029, the state and local tax (SALT) deduction quadruples to $40,000. The deduction declines after $500,000 in income and reverts to $10,000 for all taxpayers exceeding $600,000 in income. Also increasing is the standard deduction for 2025, to $15,750 for individuals and $31,500 for couples — an increase of $750 and $1,500 respectively. In light of these new limits, taxpayers may want to review whether to use the standard deduction or itemize, the National Wealth Strategies team notes.
For businesses
  • Maintains the qualified business income deduction. The deduction for up to 20% of qualified business income from "pass-through" entities, such as sole proprietorships and partnerships, which was part of the TCJA, is now permanent, and phases out under more favorable terms for income from certain businesses. Instead of paying tax at the entity level, owners of pass-through entities pay tax at potentially higher individual income tax rates. The pass-through deduction is intended to help make small business income more competitive with the low corporate tax rates.
  • Enhances deductions for business costs. The legislation provides a host of tax benefits for businesses, including full expensing of property acquired after January 19, 2025, more generous rules for business interest deductions, greater section 179 deductions and more.
While the new act institutes tax advantages, it also ends a variety of tax credits for electric vehicles, energy-efficient homes, clean energy investment and more. These phase out on different schedules, as detailed in the CIO Tax Alert. Before making any tax decisions, be sure to speak with your tax professional, the National Wealth Strategies team suggests.
Read the recent CIO Tax Alert, "President Signs Reconciliation Bill with Significant Tax Changes (PDF)." And listen to our latest CIO Market Update audiocast, and check here for regular updates on market conditions.
July 11, 2025

Should you join the latest gold rush?

Gold prices soared by nearly 65% from the start of 2024 through mid-2025, to $3,400 per ounce on June 17. By comparison, the total return of the S&P 500 rose only 28% during the same period.Footnote 1 "Many Wall Street observers expect gold to move even higher, surpassing $4,000Footnote 2 in the not-too-distant future," says Joe Quinlan, head of Market Strategy in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. "With global central banks, China and others increasing their holdings, individual investors may want to consider whether adding some gold makes sense for their own portfolio."
"Along with its qualities as a precious metal, gold acts as a hedge against inflation and geopolitical turmoil." Joe Quinlan, head of Market Strategy, Chief Investment Office, Merrill and Bank of America Private Bank
What's driving the surge?
"Along with its qualities as a precious metal, gold acts as a hedge against inflation and geopolitical turmoil," Quinlan explains. Those pressures, and growing concerns over U.S. debt and the dollar's status as a global reserve currency, have contributed to a wave of buying.
"Stockpiling by central banks in 2024 helped gold surpass the euro as the world's second-leading reserve asset after the dollar," Quinlan says.Footnote 3 And 95% of global monetary authorities believe central banks will increase their holding in the next year, one survey showed.Footnote 4 Another major factor: Investors from China, who together bought roughly 124 metric tons of gold in the first three months of 2025, up 12% from the same period in 2024.Footnote 5
Does gold have a role in your portfolio?
"Gold can offer investors diversification and long-term growth potential, and there are many ways to purchase it," Quinlan says. Two prominent options:
  • Gold ETFs invest directly in gold or in gold-related areas such as mining. As share owners, investors may benefit if gold values rise, but they don't own the physical gold.
  • Physical gold, purchased in bars or coins, offers direct physical ownership, though storage, security and insurance could add to your costs.
Know the risks
"Prices can be volatile, and recent increases are no guarantee of future value," Quinlan says. And, unlike bonds or dividend-paying stocks, gold offers no investment income. As such, gold should be considered as a potential addition to your portfolio rather than a substitute for stocks and bonds. Quinlan adds, "An advisor, if you work with one, can help you determine if gold is right for your portfolio and how best to invest."
Read our recent Capital Market Outlook (PDF) for more insights on how gold, U.S. debt and other forces are shaping the current investment landscape, and listen to our weekly CIO Market Update audiocast for regular perspectives on market conditions.
Footnote 1 Chief Investment Office, Capital Market Outlook, June 23, 2025.

Footnote 2 BofA Global Research, Global Metals Weekly, June 13, 2025.

Footnote 3 International Monetary Fund; World Gold Council. Data through Q4 2024, latest available.

Footnote 4 World Gold Council, "Central Bank Gold Reserves Survey 2025," June 17, 2025.

Footnote 5 China Daily, "Chinese investors race to buy gold amid uncertainties," May 2, 2025.
June 13, 2025

Putting the latest Middle East volatility in context

What just happened? Israeli airstrikes on Iran and the retaliation that followed sparked widespread volatility in U.S. and global markets on June 13, with oil and gold prices surging and stock markets dropping.Footnote 1 The attack raised concerns over the potential for a wider conflict and inflicted another sharp disruption on markets already rocked in 2025 by global tariffs, U.S. Treasury sell-offs, a U.S. credit downgrade and other challenges.
"While the airstrikes raise many unsettling questions at a geopolitical level, we believe they are unlikely to fundamentally alter the course of the economy and the markets." Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank
Our take on what this means
"U.S. equities, corporate earnings and consumers have shown remarkable resilience so far this year," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "While the airstrikes raise many unsettling questions at a geopolitical level, we believe they are unlikely to fundamentally alter the course of the economy and the markets." Rather, the strikes should be seen as one in a series of "pit stops" as the economy recovers, Hyzy says. "While these events, often unforeseen, cause temporary disruption, we believe that larger fundamental themes such as innovation, technology and U.S. resilience will ultimately pull the economy through."
How should investors respond?
Hyzy adds, "Without a material change to those fundamentals, we see pit-stop-related market weakness as a potential buying opportunity for long-term investors." Diversification is essential, he says. Investors may want to consider strategic investment in U.S. innovation, technology and infrastructure, as well as non-U.S. stocks. Rebalance regularly amid periodic volatility and be sure any investments fit with your larger investment strategy and goals.
Read the recent Investment Insight report from the Chief Investment Office, "The first pit stop is here." And for more insights as the geopolitical situation evolves, check back for regular updates and listen to our latest CIO Market Update audiocast.
Footnote 1 The Wall Street Journal, "Stock Market today: Oil price surges, Dow drops after Israel attacks Iran," June 13, 2025.
May 30, 2025

New reasons to consider value stocks now

Growth stocks have dominated market performance over the last decade, thanks to a handful of major technology firms known as the "Magnificent Seven." Those giants have generated impressive returns during that time, says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, "As a result, many investors now face concentration risk at a time when diversification matters more than ever." That's why, says Hyzy, now may be a good time to consider growth investing's sometimes-overlooked cousin, value investing.
"Value companies may be more resilient, since they often focus on products that consumers need in any economic conditions," says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank.
Growth or value: What's the difference?
While the growth-value distinction can seem confusing (don't all investors want their stocks to grow in value?), "It comes down to different approaches," Hyzy explains.
Growth investors look for companies whose potential for fast-growing earnings or market share could boost returns. "These may include promising startups or established firms in innovative fields like technology or biotechnology," Hyzy adds.
Value investors, by contrast, look for established companies (often in areas such as utilities or consumer staples) whose underlying value is greater than what's reflected in their current share price.
What value stocks can offer
"One of our main themes going into 2025 was that markets are rotating to a broader set of leaders," Hyzy says. "Value stocks are diversified across a wide range of industries and sectors and, so far in 2025, they have outperformed growth," Hyzy notes. Historic tariff-related disruptions, starting in April, have only added reasons to consider value stocks, he adds. "Value companies may be more resilient, since they often focus on products that consumers need in any economic conditions." Other advantages include the potential for steady dividends in volatile times, as well as discounted share prices for value, relative to growth stocks.
How to get started
"While individual funds often specialize in value or growth, you don't have to choose just one approach for your portfolio," Hyzy says. "We recommend diversifying both across and within asset classes." If you work with an advisor, they can help you determine whether your portfolio is overconcentrated in any specific area and adjust accordingly. "Be sure any allocation decisions you make fit with your overall investment strategy, timelines and goals," Hyzy adds.
For a more in-depth look at value vs. growth, read this Equity Spotlight report from the Chief Investment Office (CIO), "Reiterating our positive view on large-cap value (PDF)," and check out "Growth and value: Two approaches to investing (PDF)." Don't forget to listen to the CIO's Market Update audiocast regularly, and check back here often for timely updates on the markets and economy.
May 22, 2025

Understanding the latest U.S. credit downgrade

What just happened? The rating agency Moody's on May 16 downgraded the U.S. government's credit rating from its highest Aaa to Aa1, citing what the agency described as the government's failure to address growing debt and fiscal deficits.Footnote 1 Moody's is the last of three major ratings agencies to downgrade the U.S., following Standard & Poor's in 2011 and Fitch Ratings in 2023.Footnote 2
"Moody's cited what investors have long known: large annual fiscal deficits over successive administrations and the likelihood that this trend will continue." David Litvack, Tax-exempt strategist, Chief Investment Office, Merrill and Bank of America Private Bank
Our take on what this means
"The downgrade was not a surprise," says David Litvack, tax-exempt strategist for the Chief Investment Office, Merrill and Bank of America Private Bank. "Moody's cited what investors have long known: large annual fiscal deficits over successive administrations and the likelihood that this trend will continue." For example, extending the 2017 Tax Cuts and Jobs Act, scheduled to expire at the end of 2025, would add some $4 trillion to the federal deficit over the next decade, Litvack notes. Despite the downgrade, "we don't expect forced selling of U.S. Treasury securities," Litvack adds. "That's not something we saw following previous downgrades."
Notably, Moody's acknowledged in its ratings report that the U.S. retains exceptional credit strengths such as "the size, resilience and dynamism of its economy and the role of the U.S. dollar as global reserve currency," although it believes these no longer fully counterbalance the decline in fiscal metrics.
For more on the downgrade, read the recent Capital Market Outlook (PDF) from the Chief Investment Office and be sure to listen to our latest CIO Market Update audiocast.
Footnote 1 Moody's Ratings, "Moody's Ratings downgrades United States ratings to Aa1 from Aaa; changes outlook to stable," May 16, 2025.

Footnote 2 CNBC, "What Moody's downgrade of U.S. credit rating means for your money," May 19, 2025
April 23, 2025

Timely answers to your volatility questions

Another week, another round of volatility. With markets continuing their wild swings on April 21, investors in search of stability have some big questions: Are we past "peak uncertainty"? What's ahead for the economy? How can I manage my portfolio?
Video: Market Decode: The new AI kid on the block
Press enter to play 'Ask the CIO - Market Volatility and what may come next' video
On-screen copy:
Please read important information at the end of this program. Recorded on 4/22/2025.
Lower third:
Marci MacGregor
Head of Portfolio Strategy for the Chief Investment Office
Merrill and Bank of America Private Bank
Marci McGregor
Hello, I'm Marci McGregor. I'm here with Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. We know you have a lot of questions about the steep and ongoing volatility. I'll be asking Chris for his perspectives on markets, the economy and how investors can respond. So let's jump right in. Chris, thanks for joining me today.
Chris Hyzy
Thanks for having me, Marci.
Marci McGregor
So one of the biggest questions people are asking is when will this volatility end? When will markets find a little more stability? So let's start with what's your take? Have we passed the point of peak uncertainty? And what are you watching?
Lower third:
Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
Chris Hyzy
Well, I think first we have to recognize that things are still very complex, very complicated overall. We really haven't passed a big milestone, except peak uncertainty. It is our belief we've passed peak uncertainty, which hit right around April 8th. So when the fear gauge, known as the VIX, from the Chicago Board of Options Exchange, as we know, hit over 60.
The ten-year yield started to go up pretty precipitously. There was some fear in the bond market, not just the equity markets. The currency markets, it all coalesced right around 3 or 4 days around that time frame. We just about hit bear market status in the S&P 500 as well. But the most important thing there is to remember that when fear is at its highest level, there's an unknown factor that continues on for a little while.
So from our perspective, we look at it in four phases. You have a reset phase. When something comes in, you have a deleveraging event. That's just a fancy way to simply say there was too much money in one corner of the market, not just the equity market, but also in the bond market. And there was also a movement out of that, at the same time.
[On screen chart]
The Chief Investment Office Nine Stages of Market Uncertainty To Recovery
Reset Phase
  • Unforeseen event unfolds quickly
  • Repricing of risk
  • Liquidity needs arise
Relief Phase
  • Policy action takes place
  • Significant relief rallies occur
Re-examine Phase
  • Period of choppy trade
  • Stable growth confirmation begins
Re-growth Phase
  • The climb back environment unfolds
  • A new normal builds
Source: Chief Investment Office as of April 11, 2025. CIO views are subject to change. FOR INFORMATIONAL PURPOSES ONLY.
Chris Hyzy
When that happens, the fear gauge goes way up and you hit peak uncertainty. That's the reset phase. That's investors way of saying, I don't know about the future, but what I do know right now is it's completely uncertain. So you start to see a lot of the short-term speculators change their portfolios very quickly. And that's the proverbial statement, "Risk off."
And then second thing, after the reset phase, you go into a relief phase, which is okay. Things a little bit more calm, but not totally calm. And then we were at the end of that a little bit, and we're about to go into what we call the reexamine phase. And then, finally, it's the regrowth phase. So just to reset the reset phase, heightened uncertainty, peak uncertainty.
[On screen chart]
The Chief Investment Office Nine Stages of Market Uncertainty To Recovery
Reset Phase
  • Unforeseen event unfolds quickly
  • Repricing of risk
  • Liquidity needs arise
Relief Phase
  • Policy action takes place
  • Significant relief rallies occur
Re-examine Phase
  • Period of choppy trade
  • Stable growth confirmation begins
Re-growth Phase
  • The climb back environment unfolds
  • A new normal builds
Source: Chief Investment Office as of April 11, 2025. CIO views are subject to change. FOR INFORMATIONAL PURPOSES ONLY.
We've passed that. The relief phase is right around now into the summer months. Reexamined. What kind of environment are we in? That's like the third, fourth quarter and regrowth phase in our opinion, is next year.
Marci McGregor
So we've passed peak uncertainty. I like to think of it as a fog, though, that's still lingering for us as investors. So, if we think about the U.S. economy, what are the prospects for the U.S. economy?
Chris Hyzy
Well, the economy, obviously, we think about it as an engine. It produces the growth and ultimately the corporation produces earnings growth and revenues off of that so-called flat line area or movement up, which is what we saw in 2024. If you step back a second, right now, it's very difficult to forecast the next 12 months. We have complete uncertainty still on the tariff front, but we also have uncertainty as it relates to how foreign investors view U.S. assets right now.
Chris Hyzy
You put those two equations together. We still feel like the U.S. can actually produce about 1.5% real growth for this year. The International Monetary Fund believes the globe can grow at about 2.8 or so, but we expect different forecasts to be fluid throughout the year. And then on an inflation front, a little bump up in inflation because of the tariffs before you start to come down because of a potential demand shock next year.
The good news is this: everything that we can see in terms of the consumer is stable. They're spending at the same clip as they traditionally do on a normal basis right now. The job market is still relatively healthy, and we're not seeing signs that the soft data sentiment is moving completely into the hard data, we'll be watching that very closely.
Marci McGregor
How long might stock and bond markets remain in this limbo period we're experiencing of heightened volatility?
Chris Hyzy
We have to look at what drove us down first which is the uncertainty, primarily, over tariffs. But we started to see a slowdown late last year in some of the bigger names that drove the massive outperformance of the S&P 500, and we need to see some of those earnings come back a little bit. We don't expect that until later in the year and into 2026.
But starting right now, this limbo period should last into the summer months. This is where, as we discussed earlier, the reset to relief, to reexamine, to regrowth. So you're still in that so-called relief to reexamine phase through the summer months and into the third quarter.
Marci McGregor
How should investors prepare for volatility to potentially continue? And maybe more importantly, how do we as investors prepare for a return to normalcy? The other side of this?
Chris Hyzy
Right. Well, they say volatility is the price you pay when you're investing in equities. It's the toll you pay. And over time volatility can be your friend. We'll get on that in just a second. But having a diversified portfolio, according to your risk profile, making sure you reset or reexamine your objectives. If it's long-term growth, understand how your portfolio can produce that.
So, for instance, equities it's a long duration asset. You need to see earnings and profits pull through over the long run because that's what drives returns over the long run. And if you have a long-term time horizon, having more equities than fixed income makes sense. And you rebalance during times of fear. So having a diversified portfolio, using equities for long-term growth, and potentially total return, if you're using dividends as well.
Marci McGregor
So in periods of volatility, I often say it's a time to take a step back as an investor, maybe get your shopping list ready. So what areas of equities and fixed income could potentially benefit from this period of volatility we're in?
Chris Hyzy
This is where it gets a little interesting. The markets, you know, as of this date are down about, on average, the S&P 500 is down about 10% or so. But the sliver of the market that drove the S&P over the last few years, the largest mega-cap technology names, some cases known as the Magnificent Seven, are down about 20%.
They have a big portion of the market and they're putting pressure down on it. But if you look at Europe, Europe's up about 21% according to the Euro Stoxx 50, which is one of the biggest outperformances we've ever seen, Europe relative to the U.S., half of which is coming from a weaker dollar. So when you think about that for a second, what are the areas that have been shielded from the biggest uncertainty, which has been tariffs and the potential risk of a recession, has been the non-U.S. markets, mostly because the dollar's been weak.
So we still have a neutral outlook on non-U.S. markets. So those are the areas that should have less volatility going forward. In the U.S., the areas that should have a relief rally over the course of the next summer, the summer months, particularly the areas that have been harmed the most, and that's areas of semiconductors, the mega, mega technology areas.
Lower third:
Non-U.S. markets could experience less volatility in the coming months.
Chris Hyzy
And then the financials, those areas have also corrected a little bit too much as far as we're concerned. And those are the areas that we see can lead us out of this.
Marci McGregor
Thanks for these timely insights. Any closing thoughts you want to leave with our clients?
Chris Hyzy
You know we always say this, be as diversified as possible. Eyes on the road ahead. Oftentimes when you have the worst days, they're followed by the best days. If you're out of the market and you miss the best days of your return potential, significantly curtailed. All of that continues to this day. However, it's also important to step back and look at the fundamentals.
Lower third:
Remember: stay diversified and stay disciplined.
Marci McGregor
And stay disciplined.
Chris Hyzy
Always stay disciplined.
Marci McGregor
Thanks for joining me today, Chris.
Chris Hyzy
Thanks, Marci
Marci McGregor
In times of steep volatility, the greatest challenge for investors, and the most important, may be to stay calm. Look past the daily noise and focus on your long-term goals. We hope this video has been helpful. If you work with an advisor, now may be a good time for a conversation. And check back here frequently. We'll keep you updated as markets and conditions evolve.
Thanks for watching.
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Watch the video above as Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, shares perspectives on these and other pressing issues with head of Portfolio Strategy, Marci McGregor.
Check back here for frequent updates on markets and the economy and tune in to the CIO's Market Update audiocast series for latest CIO insights.

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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.

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