
Market briefs
Breaking insights on the economy, market volatility, policy changes and geopolitical events
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,”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.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.”

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.
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%.1 “And while the MSCI India Index outperformed the Chinese MSCI Index by nearly 100% between 2020 and 2024,2 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.

A recent CIO Capital Market Outlook report 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.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.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.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.
Read the full Capital Market Outlook report. Listen to our latest CIO Market Update audiocast, and check here for regular updates on tariffs and other economic and market conditions.
1Bloomberg. Data as of Sept. 3, 2025.
2Bloomberg. Data as of Sept. 3, 2025.
3Reuters, “Trump’s doubling of tariffs hits India, damaging ties,” Aug. 27, 2025.
4United Nations. Data through 2024, as of September 2025.
5CNBC, “India’s economy grows at faster-than-expected 7.8% in the June quarter,” Aug. 29, 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.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, 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.

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 report. Listen to our latest CIO Market Update audiocast, and check here for regular updates tariffs and other economic and market conditions.
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.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?

“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 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.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.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 can help you determine what role international stocks could play in your portfolio, he adds.
For more details on international equities, read the recent CIO Capital Market Outlook. Listen to our latest CIO Market Update audiocast, and check here for regular updates on U.S. and global economic and market conditions.
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 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:

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.” And listen to our latest CIO Market Update audiocast, and check here for regular updates on market conditions.
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.1 “Many Wall Street observers expect gold to move even higher, surpassing $4,0002 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.”

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.3 And 95% of global monetary authorities believe central banks will increase their holding in the next year, one survey showed.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 2024.5
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 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.
1Chief Investment Office, Capital Market Outlook, June 23, 2025.
2BofA Global Research, Global Metals Weekly, June 13, 2025.
3International Monetary Fund; World Gold Council. Data through Q4 2024, latest available..
4World Gold Council, “Central Bank Gold Reserves Survey 2025,” June 17, 2025
5China Daily, “Chinese investors race to buy gold amid uncertainties,” May 2, 2025.
Midyear Outlook: A game plan for the rest of 2025
IS ALL THE VOLATILITY BEHIND US — or is more choppiness on the way? Could we still see a recession this year? Which sectors could lead the way in a recovery? Are U.S. Treasurys still attractive? “After a tumultuous first half of 2025, we know investors have plenty of questions about what’s ahead,” says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
For answers, watch 2025 Midyear Outlook: On the road to recovery, above. In it, “leading analysts from BofA Global Research set the scene with a look at what to expect from markets and the economy in the second half of 2025,” Hyzy says. “Then, top Chief Investment Office strategists offer actionable portfolio ideas, as well as thoughts on how to prepare for larger, long-term themes, such as technology and innovation, already reshaping the economy.”
For even more insights to help inform your investing decisions through year-end, catch these two midyear-related videos: Market Decode: Will the U.S. economy enter the “R” zone this year? and What’s up with Treasurys, the deficit and the dollar? Then read “As the fog of uncertainty lifts, what’s next for investors?” and take the pop quiz below.
“Staying on top of the latest market thinking can help you position your portfolio for the recovery when it comes,” says Hyzy. And maybe you can impress your friends with a few tips at the next summer barbecue.
TEST YOUR MARKET KNOWLEDGE
Tap + to select correct answer and learn more
True or false: Historically, after the S&P 500 declined more than 10%, markets have fallen an additional 10% in the 12 months that followed.
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.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.

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 adds. 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.
What’s ahead for the rest of 2025?
TARIFFS, TRADE TALKS, A RATING DOWNGRADE: The year started off with enough activity — and market volatility — to fill headlines for a decade. “There are a lot of risks to pay attention to,” says Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank. “Yet the fundamentals of the economy tell a different story.”
Watch the 2025 Midyear Outlook preview above for answers to top-of-mind questions like “What’s the likelihood of a recession this year?” and “When will we turn the corner on volatility?” Get an early look at the trends and developments likely to shape your investment decisions for the rest of the year. Then save the date — June 23 — and come back for the full program, 2025 Midyear Outlook: On the road to recovery, packed with insights from Hyzy and other strategists from the Chief Investment Office and BofA Global Research on:
- Inflation, interest rates and the Federal Reserve
- The outlook for consumers and the labor market
- How potential tax changes could affect the economy and the markets
- Sectors for short-term volatility and long-term growth
- Ways you can put it all together in a balanced, diversified portfolio
To stay on top of the markets and economy every week, read the CIO’s Capital Market Outlook and tune in regularly to the CIO’s Market Update audiocast series.
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.

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,” and check out “Growth and value: Two approaches to investing.” 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.
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.1 Moody’s is the last of the three major rating agencies to downgrade the U.S., following Standard & Poor’s in 2011 and Fitch Ratings in 2023.2

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 from the Chief Investment Office and be sure to listen to our latest CIO Market Update audiocast.
Why ‘Made in China’ may be here to stay
SHRINKING CARGO SHIPMENTS from China to the U.S. — by one estimate, down 45% in mid-April from a year ago1 — have raised fears of what effect a full-blown trade war could have on the economy, U.S. consumers and investment markets. For clues, just look at the contents of your home, suggests Joe Quinlan, head of Market Strategy in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank.
“Imagine going from room to room and taking an inventory of everything labeled ‘Made in China,’” Quinlan says. You’ll quickly begin to understand the significant potential ripple effects that a prolonged trade war could have on consumers, corporations and investors, including, among other factors, higher prices and slower GDP growth. Real GDP has already dropped 0.3% in the first quarter of 2025, according to the U.S. Bureau of Economic Analysis.2
A recent CIO Capital Markets Outlook report considers the risks through the window of a typical American home. For example:

Your kitchen: “Toast some bread? Nearly all (97.7%) toasters come from China,” Quinlan says. The same goes for almost 88% of microwave ovens, 80% of blenders and 70% of refrigerators.3
Bed and bath: “China is a major supplier of U.S. bedframes, mattresses, quilts, comforters and pillows,” Quinlan says. “In your bathroom, the mirrors, blow dryers, shower heads, even the toilet, likely came from China.”3
Elsewhere: Enter the playroom — China makes about 75% of U.S. toys. Ditto for tennis shoes (nearly 74%) in the mudroom and family bikes (89%) in the garage. The list goes on. If you’re reading this on a smartphone, there’s an 81% chance you’re holding a Chinese import. “Heading to the beach this summer? That beach chair probably was made in China.”3

Reasons for compromise — on both sides
“Both countries have strong incentives to avoid a total trade breakdown,” Quinlan says. “Co-dependency runs deep.” U.S. consumers have benefited from inexpensive imports, and Chinese workers have higher employment and income. Despite a goods trade imbalance of $295 billion in China’s favor last year,4 “China remains one of the largest markets for U.S. goods,” he notes. “That’s why a total ‘divorce’ is not our base case.”
But even a trial separation might bring pain. Scarcity and higher prices could hamper U.S. consumer spending and corporate earnings. Another risk for companies: “U.S. factories are full of Chinese parts and components, all of which may be harder to find,” Quinlan says.
What can investors do?
With the tariff landscape so uncertain, investors should expect volatility and avoid trying to “time” markets, Quinlan suggests. “Stay invested in a diversified portfolio including high-quality, dividend-paying stocks in areas such as utilities and defense,” he adds. “If it feels like we’re staring into an abyss, keep in mind that markets and the economy have fully recovered from even greater uncertainties — including, most recently, the global pandemic.”
For more on U.S. imports from China and the potential impact of tariffs on the markets, read the CIO report, “Decoupling from China won’t be easy: Here is one way to think about it.” And be sure to tune in regularly to the CIO’s Market Update audiocast series for latest insights.
1CBS News, “China exports to U.S. plunge as tariffs hit, leading some experts to warn of product shortages,” April 30, 2025.
2U.S. Bureau of Economic Analysis, Gross Domestic Product, 1st Quarter 2025, April 30, 2025
3Census Bureau. Data refers to 2024, as of April 2025.
4Morningstar, “U.S. ran the biggest trade deficits with China and Mexico in 2024. What about Canada?” Feb. 5, 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?
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.
Tariff update: Why investors shouldn’t bail on bonds
AS UNCERTAINTY AROUND TARIFFS CONTINUES, churn in the equity market has been the primary focus for many investors. But the bond market is signaling equally if not more troubling signs that tariffs could do damage to the global economy. “Investors like to think of the bond market as boringly predictable. You can’t say that right now,” says David Litvack, tax-exempt strategist for the Chief Investment Office (CIO), Merrill and Bank of America Private Bank.
Normally, during heightened volatility, as the price of stocks drops investors flee to the perceived stability of bonds, and bond prices rise. During this latest bout of tariff-related volatility, however, investors have been abandoning bonds, causing their prices to fall and yields, or interest rates, to rise. “In early April, just prior to the announced 90-day pause on across-the-board tariffs for many countries, the market saw a sharp selloff in Treasury bonds, causing yields to climb,” says Marci McGregor, head of Portfolio Strategy for the CIO. That selloff has continued, creating signs of liquidity stress in the Treasury market. Such correlation between the stock and bond markets is rare, and was most recently seen during the pandemic, she notes.

What’s behind the bond selloff?
Several factors could be causing investors to bail on bonds, says Litvack. The latest volatility may have prompted some investors to sell Treasurys for cash as losses in the stock market built up. Continuing uncertainty around tariff policies might be causing others to move towards investments outside the U.S. And, analysts believe, some selling may be the result of foreign governments’ selling of Treasurys as a form of retaliation.1
Meanwhile, fears that Congress might soon curtail federal tax exemptions on municipal bonds has been driving a selloff in munis, say Litvack. A January House Ways and Means Committee report listed muni tax exemptions among more than 200 possible cuts that could help pay for renewing the 2017 Tax Cuts and Jobs Act, which is due to expire at the end of 2025.2

How investors can respond
Muni investors should view the selloff as a potential opportunity, Litvack believes. “Congress is now beginning to debate potential spending and tax cuts as they negotiate the administration’s budget, and we believe muni tax exemptions will remain largely intact,” he says. While some muni subsectors, such as bonds issued by colleges and universities, could be at risk, there appears to be bipartisan support for maintaining the exemption, he believes. “In the event that legislation is passed that reduces future tax-exempt issuance, that should increase the valuations of existing muni bonds, because of their scarcity.”
“Fixed income is an important diversifier in any investor’s portfolio — and diversification is critical during periods of volatility,” adds McGregor. Should liquidity stress become a problem in the Treasury market, the Federal Reserve has tools in its toolkit to manage it, she believes. “And rising yields could make bonds very attractive, leading to a potential rally ahead.”
For more on fixed income in today’s markets, read the latest “Fixed Income Spotlight“ and check out “Is the muni tax exemption at risk?” in the CIO’s March 31, 2025 Capital Market Outlook.
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.
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.”). 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.
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.
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. 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.
Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state. While the interest income is tax-exempt, any capital gains distributed are taxable to the investor. Income for some investors may be subject to the Federal Alternative Minimum Tax (AMT).
Retirement and Personal Wealth Solutions is the institutional retirement business of Bank of America Corporation (“BofA Corp.”) operating under the name “Bank of America.” Investment advisory and brokerage services are provided by wholly owned non-bank affiliates of BofA Corp., including Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill"), a dually registered broker-dealer and investment adviser and Member SIPC. Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A., Member FDIC.
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.
Sustainable and Impact Investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.