Breaking insights on the economy, market volatility, policy changes and geopolitical events
THE LATEST INTEREST RATE HIKE by the Federal Reserve (the Fed) sent the Dow Jones Industrial Average to a new low for the year on Friday.1 Though Wednesday’s .75% rate increase (the third in a row) was widely anticipated, the markets’ downturn has gathered speed as the Fed and central banks globally struggle to contain stubbornly high inflation.
“We believe markets are in a ‘reset phase,’ trying to simultaneously price in higher rates, a stronger dollar, lower economic growth and earnings, and heightened geopolitical risk. This takes time,” says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank. “Investors should expect markets to remain choppy through the end of the year.”
Stocks aren’t the only asset class that has struggled, Hyzy notes. “Bonds have been selling off, and gold and oil prices have declined, signaling that investors are moving toward an ultra-defensive tone.”
As with the markets generally, individual investors should be thinking defensively, Hyzy suggests. That could mean reducing your exposure to stocks, for conservative investors, or increasing your proportion of utilities, healthcare and other “defensive stocks” that tend to outperform other stocks during volatile times. Bond investors, meanwhile, may want to increase their exposure to long-term government bonds.
Another key point is diversification, across and within asset classes, to help mitigate volatility, Hyzy adds. And while a defensive posture is warranted, investors with a long-term view should look for attractively priced stocks over the next three to six months that could benefit as the economy and markets stabilize.
For weekly insights on market volatility, tune in to the “CIO Market Update” audiocast series.
1 The Wall Street Journal, “Dow Drops to Lowest Level of 2022 as Growth Fears Roil Markets,” Sept. 23, 2022.
THE QUEST FOR A SUSTAINABLE FUTURE — a key theme of this week’s global Climate Week NYC 20221— has spawned a growing movement away from the long-time global economic model based on consumption and disposal. Instead, businesses, governments and environmental leaders are taking steps to foster what economists call a “circular economy,” which shrinks waste and pollution by keeping products and materials in circulation longer, and by regenerating natural resources rather than simply extracting them.2
Based on current consumption trends, experts estimate that by 2030, the world will need two times the Earth’s resources just to keep up with demand.3 “That path, which we’ve been on for centuries, is no longer viable,” believes Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. “Fundamental change, while complex and difficult, has the potential to benefit businesses, consumers and countries both environmentally and economically,” he adds. “Circular Economy,” a recent report from the Chief Investment Office (CIO), explains what’s involved and how investors can take part.
A circular economy is based not just on recycling, but also on designing waste and pollution out of the system wherever possible. To cite just one example, some clothing manufacturers are now using innovative processes to break down fabric from old garments to make new products.4 Such developments are poised to capture consumers’ growing interest in sustainability, Hyzy notes—according to one estimate, the clothing resale market will exceed the fast fashion market by 2030.5
Another key element of the circular economy involves better managing biodegradable waste. Instead of material simply being dumped, usable byproducts are recycled, remanufactured and redistributed for use, while unusable byproducts are carefully maintained so that they can be safely absorbed back into the earth.
While the circular economy represents a broad concept rather than specific investments, says Hyzy, “Investors who potentially incorporate environmental risk factors into their portfolios may support the transition, while at the same time positioning themselves for potential financial returns.” For example, you might consider supporting industries working towards net-zero carbon emissions. For more ideas, read “The World Is Changing — Should Your Investments?” and “What Could Climate Change Mean for Your Investments?”
“But keep in mind that ESG, however vital, is just one factor to consider when building an investment portfolio,” Hyzy cautions. Before making decisions, make sure any investments fit comfortably with your long-term goals.
2 Ellen MacArthur Foundation.
3 Overshootday.org and Global Footprint Network, July 2021.
4 Ellen MacArthur Foundation.
5 Absolute Strategy Research, “Investment Themes for an Uncertain Transition,” January 2022.
THE DOW JONES INDUSTRIAL AVERAGE DROPPED nearly 1,300 points Tuesday on news that the Consumer Price Index (CPI) rose by 8.3% for August, compared with August 2021. While that number actually represents a slight dip from July’s 8.5% year-over-year number, economists and investors had hoped to see inflation ebbing faster. Disappointment set off the steepest one-day market sell-off in more than two years.1
“Unfortunately, the recent drop in gas prices was offset by higher prices in areas such as shelter and food,” says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank. Core inflation, which does not include gas and food, also rose more than expected. As a result, markets expect the Federal Reserve (the Fed) to raise interest rates by at least another .75% when it meets next week, he adds.
“Inflation may have peaked over the summer, but it remains well above the Fed’s target of 2%,” Hyzy says. “Therefore, we expect to see continued choppy markets over the near term.” Tuesday’s drop, ending an extended rally through much of July and August, should be seen in the context of a post-pandemic “reset period” of uncertainty and mixed signals, he adds. “We expect the reset to last six to nine months, after which we should see a return to more normal market valuations.”
Given the likelihood of volatility for months to come, investors may want to consider defensive steps for their portfolios, Hyzy suggests. Depending on your situation, that may mean adding so-called defensive stocks, such as utilities and healthcare, which tend to offer stability and consistent returns even when the economy and markets struggle. For more conservative investors, that could mean reducing your exposure to equities. Still, long-term investors may find strategic opportunities to buy equities that could perform well as the economy and markets stabilize. “We continue to suggest maximizing diversification across asset classes and positioning yourself for the long term,” he says.
1 The Wall Street Journal, “Stocks Suffer Worst Day Since June 2020,” Sept. 13, 2022.
STRONG INFLATION-FIGHTING WORDS from the Federal Reserve (the Fed) spurred a 1,000-point drop in the Dow Jones Industrial Average last Friday.1 And that may be a prelude to a September marked by intermittent volatility as the Fed continues to raise interest rates and tighten the money supply, says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank.
“Markets were prepared for Fed chair Jerome Powell to signal ongoing tightening, but they were not prepared to hear terms such as ‘purposely,’ ‘forceful’ and ‘some pain,’” as he discussed the prospects for future rate hikes to tame inflation at last week’s Jackson Hole Economic Symposium,2 Hyzy says. “These words indicate that interest rates will likely stay higher and the money supply will be tighter for longer than markets had anticipated.” And that, in turn, signals a higher cost of capital, which eventually means slower growth, he adds.
“The combination of monetary tightening and weaker growth likely creates a formidable headwind for stocks and other risk assets,” says Jonathan Kozy, Senior Macro Strategy Analyst for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank. And the Fed has few options but to stay the course. “It will be difficult to pivot away from its current policy of rate hikes and monetary tightening, since inflation is still running hot,” adds Kozy, author of a recent CIO Capital Market Outlook report.
In terms of the economy and markets, “It’s no longer a question of whether we are aiming for a soft landing; it’s now more about how to avert something much harder,” Kozy adds. “For now, we expect to see consolidation in equity markets and see-saw trading as more data is released. There are still plenty of unknowns.” Among them, how high the next rate hike, scheduled to be announced at the Fed’s September 20-21 meeting, will be.
The current situation is grounds for caution and adhering to a long-term strategy and goals, rather than taking abrupt or drastic action, Hyzy says. “As we carefully follow each development, we recommend staying on guard, balanced and diversified. We maintain a neutral view on equities, as risks to economic growth and corporate profits remain.” Further in the Fed hiking cycle, long-term equity investors may find buying opportunities at attractive prices, he adds, and high-quality bonds continue to be an important way to diversify and protect a portfolio.
For more insights from the CIO, read “Your Frequently Asked Questions on Volatility Answered” and tune in regularly to the CIO Market Update audiocast.
AFTER WEEKS OF NEGOTIATING, last Friday the House of Representatives passed the Senate version of the Inflation Reduction Act of 2022, and this Tuesday the President signed it into law.1 Despite its name, the bill may be more remarkable as “the single biggest climate investment in U.S. history,” says Mitchell Drossman, head of National Wealth Strategies in the Chief Investment Office for Merrill and Bank of America Private Bank.
The bill’s $369 billion in spending on energy security and combating climate change will cut domestic carbon emissions by about 40% by 2030, its Senate backers say.2 Meanwhile, the bill promises to generate approximately $762 billion by raising revenue and controlling costs via a combination of new corporate taxes, price controls on Medicare prescription drugs and enhanced IRS enforcement. A new Chief Investment Office Tax Alert, “Inflation Reduction Act of 2022: From December Shocker to July Surprise!” details the bill’s provisions.
“The bill provides an assortment of credits, ranging from consumer home-energy rebate programs to consumer tax credits for those making their homes more energy-efficient and manufacturing incentives for corporations investing in on-shore clean-energy initiatives. It also pays for a $64 billion, three-year extension of subsidies for people who buy health coverage under the Affordable Care Act, designed to limit the impact of potential premium hikes. In addition, it places an annual limit of $4,000 in 2024 and $2,000 starting in 2025 on out-of-pocket drug spending for Medicare beneficiaries and caps their out-of-pocket insulin expenses at $35 a month. The remaining $300-plus billion is slated to go towards deficit reduction.
Among the key provisions is a 15% minimum tax on large corporations’ “book income,” aimed at closing the gap between the income they report to shareholders and the income that appears on their tax returns. Beginning in 2023, the tax, which would affect more than 100 major companies and raise an estimated $222 billion over a 10-year period, could change the way those companies expense equipment and capital improvements, Drossman says.
Another $74 billion would come from an excise tax of 1% on stock buy-backs (or repurchases) by publicly traded companies, starting in 2023. “A number of exclusions apply,” Drossman notes. “For example, no excise tax would be due on repurchases that are contributed to an employee pension plan or employee stock ownership plan.” Still, companies subject to the tax might accelerate planned repurchases to make sure they take place before the tax goes into effect, he adds. Stock buy-backs tend to boost share prices and earnings per share to investors in the short term, notes Drossman.
The bill would also reduce government spending by $265 billion by allowing Medicare to negotiate for prescription drug prices, starting in 2026. “Another $80 billion in investments in IRS modernization, compliance and enforcement measures are expected to yield $204 billion in additional tax collections over 10 years, for a net revenue increase of $124 billion,” Drossman says.
“Just because you call it the Inflation Reduction Act doesn’t mean it’s so — at least in the near term,” Drossman says. It’s unlikely to bring immediate relief to consumers stretched by higher costs for food, gas and other goods. “While drug price controls will bring down costs and, likely, some inflation, those controls don’t kick in until 2026 and therefore won’t have short-term benefits.”
IN ITS ONGOING FIGHT AGAINST INFLATION, the Federal Reserve (the Fed) on Wednesday hiked interest rates by .75% for the second month in a row — the largest two-month increase since the 1980s.1 This marked the fourth time the Fed has raised rates in 2022, after years of near-zero interest rates and low inflation.
In his remarks explaining the rate hike, “Chair Jerome Powell clearly stated the Fed will do what is necessary to break the back of inflation, and the markets applauded that commentary,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. The S&P 500 rose by 1.8% on Wednesday. The Dow Jones Industrial Average rose .8% and the tech-heavy Nasdaq Composite index jumped 3.2%, boosted also by better-than-anticipated earnings reports from some tech companies.2
Following Wednesday’s Fed announcement, the Bureau of Economic Analysis on Thursday reported that U.S. GDP dropped by .9% in the second quarter, the second quarterly decrease in a row, surprising economists who had expected a slight increase.3 While two significant consecutive declines in GDP often signal a recession, “technically, we’re not there yet,” believes Hyzy. “But the probability is rising for a mild recession later this year or early next year,” he says.
At least initially, markets shrugged off the GDP news and talk of a potential recession, with the S&P 500 gaining another 1.2% on Thursday, and the Dow and the Nasdaq posting similar gains.4 In part, this could reflect that markets are concerned mainly with inflation and are already pricing in the impact the Fed’s higher rates and tighter money supply would have on GDP, Hyzy believes.
In his announcement, Powell signaled the possibility of another large increase at the Fed’s next meeting in September, saying that the decision will depend on the data we get between now and then. “We foresee rate hikes continuing to the end of the year and most likely into the beginning of next year,” Hyzy says. “If the Fed pauses these increases, it will be because its preferred measure of inflation, the core PCE price index, is coming down aggressively,” he adds. The core PCE (for “personal consumption expenditures”) excludes two items, food and energy, where rising prices have hit consumers hardest. The Consumer Price Index (CPI), which includes food and energy, will need to drop before markets — and consumers — believe inflation has turned a corner, Hyzy believes.
Until a clearer picture emerges on inflation and the economy, investors should think defensively for the second half of the year, Hyzy suggests. That could mean lowering your exposure to high-growth stocks such as technology, and increasing proportionally to high-quality, dividend-producing companies in areas such as utilities and healthcare.
While rising rates may lower the value of bonds you own, their higher yields are making bond income attractive for the first time in years, he adds. An approach known as bond laddering, investing in bonds that mature at different times, could help you capture rates as they rise, to maximize your income.
For more ideas for the balance of the year, watch “Midyear outlook: Turning volatility into opportunity.” And tune in weekly to the CIO Market Update audiocast series.
THE LATEST INFLATION NUMBERS, announced this week, came in much higher than expected. The Consumer Price Index (CPI) rose 9.1% from June 2021, according to the Bureau of Labor Statistics (BLS). That’s the largest such increase in more than 40 years.1 A 41.6% surge in energy prices helped drive the increase, followed by a 10.4% increase in food prices. Coming on the heels of May’s 8.6% year-over-year rise, the June news dampened hopes that the economy might be ready to turn the corner on inflation.
But the inflation news hasn’t been all bad. The BLS report showed core inflation (not counting energy and food) increasing by only 5.9% over June 2021, a slightly lower rate of growth than May’s 6%.2 And despite the June energy numbers, gas prices nationally have declined somewhat in recent weeks. Yet volatile energy prices could easily go higher again, and the sharp jump in the CPI virtually guarantees that the Federal Reserve (the Fed) will continue raising interest rates and tightening the money supply in hopes of bringing inflation under control.
“The most important question right now,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, “is how much corporate earnings could contract as the Fed continues its tightening policies.”
The Fed is likely to raise rates by another .75% at the end of July, with some analysts weighing the possibility of a full 1% hike — a move the Bank of Canada just made.3 What that might mean for the economy is uncertain. Consumer spending, while declining in the face of higher prices, is not as yet signaling a recession, believes Hyzy.
“We are in a ‘reset’ period, moving from maximum liquidity and low rates to minimum liquidity and higher rates,” Hyzy says. If inflation turns the corner soon, “we believe that corporate earnings will decline at most by 10%, after which a new cycle of economic growth could begin.” But if the Fed is forced to continue raising rates and tightening the money supply, the economy could tip towards recession, with a much steeper drop in earnings. “Markets are likely to remain volatile until the inflation, interest rate and liquidity picture becomes clearer through the second half of 2022,” Hyzy adds.
For the time being, we suggest a more defensive approach to investing, says Hyzy. “In our multi-asset portfolios we have lowered equities to neutral from slightly overweight by lowering exposure to small-cap stocks,” he notes. Investors may want to consider defensive stocks such as consumer staples and utilities and less emphasis on areas such as materials and consumer discretionary stock. Bonds remain important for diversification, and amid rising rates, “bond yields will become attractive again.”
Hyzy adds, “We believe that in the next six to nine months, long-term investors may see a very important buying opportunity,” with the ability to add securities at attractive prices at the onset of a new growth period.
For more CIO insights and strategies to consider, read “From the Great Separation to the Reset Period,” and “Fine-tune Your Investments for Rising Inflation — and Slower Growth.”
SO WHAT JUST HAPPENED? The Federal Reserve (the Fed) raised interest rates by .75% on Wednesday — the largest interest-rate hike since 1994.1 After years of near-zero rates, this was the third increase of 2022, following a .50% hike in May and a .25% hike in March, with more likely as the Fed works to stem increasingly stubborn inflation. “We expect a similar increase in July, along with tougher talk from the Fed about monetary tightening,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
Wednesday’s increase came amid sharp market volatility, driven by last week’s news of 8.6% year-over-year inflation for May. “This has led to selling by investors who hoped for a sign that consumer prices had peaked,” Hyzy says. On Monday, the S&P 500 dropped into bear market territory, down more than 20% from its highs in January 2021.2 A recent Capital Market Outlook report from the Chief Investment Office outlines the possible path for inflation and the economy during the balance of 2022 and beyond.
Volatility, like rate increases, is likely to continue throughout 2022 as markets look for stability, Hyzy says. “Looking out at the landscape, we see some good news, some bad news and one ‘wild card’ we’ll be watching for in the second half of the year,” Hyzy says.
The good news. Despite the worrying May numbers regarding consumer prices, “We do see some signs that inflation may have peaked,” Hyzy says. “We’re seeing a slowdown in U.S. wage growth, a backup in inventories and some softening in global purchases, and a deceleration in money-supply growth, among other variables,” Hyzy says. If borne out, these trends could lead to a leveling out of prices.
The bad news. Even if inflation stabilizes, it will likely settle well above the Fed’s target of 2% inflation, Hyzy believes. “This means the Fed will still have to be hawkish about raising rates, though how fast and how far remains unclear,” he says. Rising rates in turn mean a higher risk of recession, he notes. Yet some “tailwinds” — a fading pandemic, manageable levels of consumer debt and the need for companies to rebuild depleted inventories — may prevent that from happening soon. “While we are likely to see slower GDP growth, at this point we still do not expect a recession in the next year to 18 months,” Hyzy says.
A wild card. As recent events have made clear, inflation and volatility are difficult to predict with certainty. “The possibility remains that inflation could slow by more than expected,” Hyzy says. This could allow the Fed to pause or ease up on future rate hikes, bringing the stability markets seek.
Diversification and rebalancing remain essential guidelines for navigating uncertainty. “We continue to favor high-quality, dividend-paying companies, and the U.S. versus non-U.S., as well as diversifying across small, mid- and large-cap stocks,” he says. And as volatility continues, patient investors sticking to long-term strategies may find opportunities to buy assets at attractive prices.
For more insights from Hyzy on inflation, the economy and current market conditions, tune in to the CIO’s weekly “Market Update” audiocast series.
STOCK AND BOND PRICES plummeted on Friday after the latest inflation figures were announced, reflecting a higher than expected 8.6% year-over-year increase,1 and they continued their decline on Monday morning.
Periods of volatility can be unnerving — and can even tempt investors to get out of the markets. “Don't panic when these situations cause so much anxiety,” says legendary long-term investor Jeremy Siegel, the best-selling author of Stocks for the Long Run. “Stay the course, diversify and be broad-based.”
In this video conversation with Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, Siegel shares ideas on how to maintain perspective during times of heightened uncertainty and points to the steady long-term upward trend that equities have maintained over the past 200-plus years. The two also share thoughts on the so-called 60 / 40 asset allocation, the current business cycle and what Siegel finds most encouraging about today’s younger investors.
Watch the video to learn more and also read our article 7 keys to getting through a prolonged market downturn.
GIVEN THIS YEAR’S HEIGHTENED VOLATILITY, many investors are reaching out to their financial advisors to discuss rebalancing their portfolios. As part of that conversation, if you’re 72 or older (more about that age later), you may also want to factor in any cash needed to make your required minimum distributions (aka RMDs) for the year.
“As you rebalance your investments — selling some assets, buying others — to better align with current market conditions, consider how a sale of stock might help you meet your RMDs for the year,” suggests Mitchell Drossman, head of National Wealth Strategies in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. And if you’re selling at a loss, speak with your tax professional about how you can use the loss to offset any capital gains.
The regulations controlling RMDs are complex. “Americans often struggle to adhere to a dizzying array of RMD rules, codified in 2019’s SECURE Act,” says Drossman. A new CIO Wealth Strategy Report, “IRAs: Required Minimum Distributions (RMDs),” could help you better understand these requirements and avoid potentially costly penalties. Among the questions covered in the report:
Currently, 72 is the age at which you must begin taking RMDs from tax-advantaged retirement accounts such as traditional IRAs and 401(k)s — but for the year in which you turn 72, you can wait until April 1 of the following year to take the distribution. Be sure to weigh the advantages of delaying against the cost of bunching more income (with potentially higher taxes) into the following year. After that first year, “generally, you must withdraw your RMDs by December 31,” notes Drossman. Whatever your age, don’t miss the deadline, he adds. “You could be subject to a penalty.”
You may be able to postpone taking RMDs a while longer if a bill recently passed by the House, now before the Senate, becomes law later this year. Among a host of provisions aimed at encouraging increased retirement savings for people of all ages, the bill (dubbed SECURE Act 2.0) would allow savers to wait until age 73 to begin taking RMDs.1 And by 2033, the age would rise to 75. Those extra years could give your assets more time to grow federally tax free. For more on what the bill may contain, read “The Winding Road to Retirement,” from Bank of America Institute.
There are two methods for calculating this figure. “The first, using the Uniform Table, applies unless your sole primary beneficiary is a spouse who is more than 10 years younger than you are,” Drossman says. In that case, you would use the Joint and Last Survivor Table, enabling you to take smaller RMDs. Given the complexities involved, it’s a good idea to consult your tax specialist and financial advisor before making any RMD decisions, Drossman advises.
For insights on how to use any losses you experience when selling assets to offset capital gains, read “Tax-Loss Harvesting and Personal Indexing: An Effective Portfolio Strategy During Volatile Market Environments.”
SLOWER GROWTH, RISING INTEREST RATES and ongoing market volatility in 2022 have raised concerns about a possible recession — defined by the National Bureau of Economic Research as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” “Though we continue to believe economic expansion will remain intact, we’re closely monitoring several key risk factors,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
Hyzy and others in the Chief Investment Office (CIO) are using a “recession indicator” they developed prior to the 2020 pandemic-related recession. The indicator (updated monthly) arrives at a single measure of recession risk by looking at four key economic factors:
The CIO team compares current data from those four areas with historical data to estimate the likelihood that a recession is imminent or underway. “Historically, recessions have started within a few months of, or contemporaneous with, the composite indicator surpassing a 50% threshold, which we classify as ‘extreme recession risk,’” says Ehiwario Efeyini, director and senior market strategy analyst, Chief Investment Office, Merrill and Bank of America Private Bank. That hasn’t happened yet, in spite of all of the troubling headlines. The CIO believes that “data from recent months imply low recession risk at present, with no single factor in elevated or extreme territory.”
Despite recent volatility in equity markets, the unemployment rate has held steady, just above a 50-year low. And while inflation has dampened consumer confidence, spending remains healthy. Moreover, monetary policy still appears supportive. “We still view Federal Reserve (Fed) policy as highly accommodative at present and are doubtful that the recent yield curve inversion foreshadows a looming recession,” Efeyini notes. (The yield curve inverts when yields on longer-term debt drop below yields on short-term debt of the same credit quality.) In fact, he points out, when the Fed funds rate is measured against the 10-year yield, the curve remains steep. “This suggests that Fed policy would still have to tighten substantially from current levels in order to reach restrictive territory,” he says.
Among the factors we’re keeping an eye on, says Hyzy, is whether the Federal Reserve will succeed in its delicate balance of raising interest rates and tightening the money supply to counter inflation without going too far and stalling growth too much. “There have been very few soft landings in history,” notes Hyzy. “Even if we don’t tilt into recession, what may result, in my opinion, is a ‘growth recession,’ with the economy transitioning from a period of very high growth and excess spending — what some people might call a sugar high — to a period where the economy continues to grow but at a much slower rate.”
As the CIO team continues to monitor the situation, Hyzy advises clients to avoid making precipitous decisions. Concentrate instead, he suggests, on maintaining a diversified portfolio, rebalancing periodically and investing towards your long-term goals.
To learn more about the CIO’s recession indicator, read “Assessing Recession Risk: The Recession Indicator,” in Capital Market Outlook.
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Opinions are as of the date of these articles and are subject to change.
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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.”).
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You have choices about what to do with your 401(k) or other type of plan-sponsored accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth IRA, roll over a 401(k) from a prior employer to a 401(k) at your new employer, take a distribution, or leave the account where it is. Each choice may off er different investments and services, fees and expenses, withdrawal options, required minimum distributions, tax treatment (particularly with reference to employer stock), and provide different protection from creditors and legal judgments. These are complex choices and should be considered with care.
Diversification does not ensure a profit or protect against loss in declining markets.
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