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Timely insights to help you manage risk when markets shift
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 our 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 our Chief Investment Office.
Past performance is no guarantee of future results.
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.
Download CIO “Investment Insights: Stay the Course” here.
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.
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.
For insights into the recent volatility, and how best to respond, read the new CIO Investment Insights, “The Latest: Darkest Before the Dawn.”