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What Coronavirus Means for the Markets and Your Money

Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, answers questions top of mind for everyone right now

EVEN BEYOND THEIR DEEP CONCERN over the coronavirus and health, many people are wondering about its impact on the economy and the savings and investments they’re counting on for retirement and other important goals. While much remains unknown, Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, answers some financial questions that may be on your mind right now.

Q: With so much financial news related to coronavirus, how can I separate what’s important from what’s not?

A: That’s a challenge when new developments are coming out every day and firm answers are in short supply. The best approach may be to focus on the things we can control rather than things we can’t. When it comes to your money, that means staying focused on your goals and avoiding making sudden changes out of panic.

“Stay focused on your personal financial goals, and avoid making sudden changes out of panic.”— Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank

Q: Is it best to keep my savings in cash until things settle down?

A: With investment markets going up and down as rapidly as they have in recent weeks, cash may feel like the safest place to be. Yet while cash is vital for covering regular living expenses and unexpected emergencies, it is generally not an effective way to save for longer-term goals, such as retirement, that will continue to be important after the coronavirus crisis subsides.

The best approach for your retirement accounts and other long-term investments is to stay diversified. That means having a mixture of stocks, bonds and other assets chosen based on your personal goals, how you feel about risk, and how long you have until retirement. One of the biggest risks, potentially, would come from sudden, kneejerk reactions, such as taking cash out of a long-term plan or stopping regular contributions. People who stayed invested through the 2009 financial crisis, for example, not only recovered but had the best chance for growth in the years that followed.

Q: How could low interest rates affect my mortgage?

A: To help stimulate the economy, the Federal Reserve cut its benchmark interest rate to a range of zero to .25% on March 15.1 If you’re already making mortgage payments at a fixed rate, your rate won’t change. Though the Federal Reserve rate isn’t tied directly to mortgages, this recent cut could mean lower rates if you’re buying a house or considering refinancing your current mortgage. But keep in mind that buying and refinancing come with costs, and the rate you’re offered could depend on a number of factors, including your credit rating. So be sure to carefully consider all of the costs involved before making any decisions.

“People who stayed invested through the 2009 financial crisis not only recovered but had the best chance for growth in the years that followed."— Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank

Q: What could all this volatility mean if I’m near or in retirement?

A: These times are especially unsettling if you are counting on your savings for income in the near future. Yet, if possible, sticking to a diverse mix, including both bonds and stocks, can help give your savings the chance to recover from temporary volatility and potentially keep growing for years or even decades of retirement. This may include examining your risk profile to determine whether stocks that pay dividends could help balance out the lower interest rates that bonds are currently producing. Depending on your circumstances, you might also consider adjusting your spending habits or possibly even finding other means of income.

Q: When could the economy and markets go back to normal?

A: The simple answer is no one knows for sure. We believe the longer the crisis lasts and the more serious it becomes, the likelier it is that we’ll experience a recession. Prior to the outbreak, the fundamentals of the U.S. economy were strong. If the virus is contained, we could see a recovery later in the year. Keep in mind that we’ve been through ups and downs before, and history suggests that the economy and markets will emerge from disruptive times, recover and continue to grow.

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1Fed Cuts Rates to Near Zero and Will Relaunch Bond-Buying Program, The Wall Street Journal, March 15, 2020.

Information is as of 03/20/2020

Opinions are those of the author(s) and are subject to change.

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management ("GWIM") clients, is part of the Investment Solutions Group (“ISG”) of GWIM, a division of Bank of America Corporation (“BofA Corp.”).

Investing involves risk, including the possible loss of principal. 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.

Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa.

Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.

Dividend payments are not guaranteed, and are paid only when declared by an issuer’s board of directors. The amount of a dividend payment, if any, can vary over time. 


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