CHIEF INVESTMENT OFFICE

Capital Market Outlook

March 6, 2023

All data, projections and opinions are as of the date of this report and subject to change.

IN THIS ISSUE MACRO STRATEGY 

Macro Strategy—Watch the Gap: A wave of better-than-expected economic data over the Chief Investment Office
past month has boosted expectations for a sustained U.S. economic growth reacceleration Macro Strategy Team
entailing continued Federal Reserve (Fed) rate hikes and higher-for-longer interest rates.
MARKET VIEW 
While the negative growth momentum apparent at the end of 2022 has been mitigated,
Lauren J. Sanfilippo
warning signals from various leading indicators still suggest a dimming outlook. For example, Director and Senior Investment Strategy Analyst
as high labor costs continue to eat into profits, stronger-than-expected headwinds to corporate
profits are likely ahead, forcing companies to curb hiring. Thus, we believe that the recent batch THOUGHT OF THE WEEK 
of positive surprises is unlikely to be sustained, with sharp current divergences among certain
Joseph P. Quinlan
typically strongly correlated indicators likely to be resolved in favor of renewed weakness. Managing Director and Head of CIO Market
Strategy
Market View—Powell vs. the $26 Trillion Hydra-headed Beast: One year into the Fed
tightening cycle, it confronts a U.S. economy refusing to roll over easily. The call for a U.S.
MARKETS IN REVIEW 
recession continues to be pushed out. Corralling a $26 trillion economy isn’t easy given
the diverse nature of the U.S. economy; our economy is hydra-headed—or having many Data as of 3/6/2023,
branches. and subject to change

Hence, while manufacturing has slowed, services have accelerated. While housing is down,
energy is soaring. California struggles, while the Carolina’s boom. We still maintain a bias Portfolio Considerations
toward U.S. assets due in large part to the higher-quality, diverse nature of the U.S.
Overall, we are neutral Equities and
economy.
Fixed Income due to our base case of
Thought of the Week—U.S. Exports and the $3 Trillion No One is Talking About: a grind-it-out environment in 2023,
but we see opportunities in total
Even in the face of a super strong U.S. dollar, China shutdown and a war in the heart of
return sectors, dividend payers, high
Europe, U.S. exports of goods and services hit a record high of $3 trillion last year. Nothing
quality overall and better
better underscores the global competitiveness of Corporate America. opportunities in Small-caps and non-
An export powerhouse, America’s exports run the gamut, ranging from industrial supplies, U.S. Equities later in the year. We
maintain a preference for high-quality
to autos, advanced technology products, energy, and a host of service activities. One
bonds, as nominal and real rates are
caveat: America’s tilt toward trade and investment restrictions/protectionism threatens to
some of the most attractive in over a
impede global sales and future global earnings of U.S. multinationals. decade, while the economy is
deteriorating later in the economic
cycle, and recessionary signals
increase. In addition, the inclusion of
Alternative Investments,* for qualified
investors, to help mitigate risk and/or
potentially enhance portfolio returns,
should also increase in importance in
2023, in our opinion.

* Many products that pursue Alternative Investment

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment strategies are available only to qualified investors.
products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”).
MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp.
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
Please see last page for important disclosure information. 5493588 3/2023
MACRO STRATEGY
Watch the Gap
Chief Investment Office Macro Strategy Team Investment Implications
While forward-looking indicators of economic activity have overwhelmingly remained in territory
The surge in labor costs over the
typically associated with an approaching recession, coincident indicators have not reached the
past year indicates that profit
recession threshold yet. In fact, led by eye-popping employment data, many rebounded in
margins are likely to keep declining
January. Easing supply disruptions, favorable winter temperatures, robust personal income gains,
in coming quarters, suggesting
and slowing inflation—from a 10.5% annualized three-month rate in June 2022 to 3.5% in
January, according to the Bureau of Labor Statistics’ (BLS) Consumer Price Index, for example— that expectations for a renewed
have lifted consumer spending and hiring in early 2023. Even housing enjoyed some reprieve, bull market in Equities remain
with January new home sales offsetting continued declines in existing home sales as a modest premature. Corporate credit
drop in mortgage rates and increase in inventory spurred fence sitters to jump in. spreads are likely to widen as a
result, while Treasurys should
Despite this batch of positive economic surprises, there are reasons to believe that the
outperform both.
macroeconomic environment is not conducive to a sustained growth reacceleration. Labor
supply is stretched, sharp increases in wage costs and declining business pricing power are
already biting into profit margins, and housing remains in a deep recession. Indeed, with
building costs up and insufficient single-home construction over the past 15 years, the
inventory of vacant homes for rent or for sale has dropped to a 40-year low when adjusted for
population growth, rendering homes unaffordable for first-time buyers. The more than doubling
of mortgage rates in less than a year has further amplified this affordability problem,
deepening the housing recession. In addition, many existing homeowners have mortgages so
far below current interest rates that they find it too expensive to move. As a result, mortgage
demand has dropped to a 28-year low, and home sales are the lowest in 12 years, according to
the Mortgage Bankers' Association and the National Association of Realtors.
In addition, surveys of manufacturing activity, including the Institute for Supply Management
(ISM) Index for February, still remain at or close to recession territory. Twelve of 18
industries surveyed by the ISM reported a contraction in business activity, with a growing
number reporting declining new orders. Thus, signals for weakening economic conditions
ahead or an approaching recession remain too numerous and consistent with each other to
be dismissed, in our view. Overall, the tenth straight monthly decline in The Conference
Board Index of Leading Indicators (LEI) has been validated by a deterioration on numerous
fronts, including manufacturing, bank lending and small business surveys, as well as various
labor-market indicators, such as job openings (Exhibit 1).
Exhibit 1: Year-To-Year Drop In Job Openings Confirms The Signal From The LEI.
% %
100 25
Job Openings and Labor Turnover Survey (JOLTS): Job Openings (y/y % change,
80 Left Scale) 20
60
Conference Board Index of Leading Indicators (6-month annualized % change, 15
Right Scale)
40 10
20 5
0 0
-20 -5
-40 -10
-60 -15
2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Gray area represents recession periods. Sources: The Conference Board; Bureau of Labor Statistics/Haver Analytics. Data as of
March 3, 2023.
Out of the various positive recent economic surprises, labor-market data, in particular, have
boosted growth and interest rate expectations. After all, the unemployment rate dropped to
a rock bottom 3.4%, the lowest in more than 50 years, job-vacancy tallies rebounded from
already unusually elevated levels, unemployment compensation claims have not budged from
minimal levels (despite a surge in corporate layoff announcements), and labor income started
the year with a surge, suggesting strong fuel for sustained consumer spending.

2 of 8 March 6, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

Still, employment and wage-and-salary growth indicators tend to lag other, more forward-
looking indicators, typically only beginning to weaken when a recession has already started. It
remains to be seen how long it will take for the typical late-cycle patterns to start showing up
in labor market data, but we believe that an inevitable cyclical deterioration in employment is
also at hand. Structural constraints to the weighted-average labor force participation rate due
to an aging population as well as wealth and behavior considerations discussed in past reports
also suggest limited potential for stronger labor supply growth. As shown in Exhibit 1, changes
in labor demand are already tracking the direction suggested by the LEI.
A fundamental reason to expect deteriorating employment ahead is the surge in labor costs,
given their negative effects on profit margins and the need for labor cost increases to
moderate from their fastest pace since 1984 (as measured by the BLS Employment Cost Index
(ECI)) to levels more consistent with the Fed’s 2% inflation target. Assuming a 1% productivity
growth trend, aggregate labor costs need to increase about 3% per year for the inflation goal
to be achieved, compared to the 5.1% year-over-year jump over the past year. Previously, such
a big deceleration occurred only after deep recessions.
For now, the fading business pricing power and revenue growth evident in fourth-quarter
earnings reports combined with softening demand for labor (cyclical, Exhibit 1), and limited labor
supply (structural) suggest that the ECI is likely to ease to only about 4% over the next year or
two without a recession. Although welcome, this would not be enough to sustainably bring
inflation to target or to prevent severe and persistent downward pressures on aggregate profit
margins over the next six to eight quarters, given the strong past correlation between ECI
growth rates and profit margins, and the lags involved (Exhibit 2). Based on our analysis, it would
take a sharper slowdown in the ECI to about 2% to 3% in order to restore margins in 2024 after
a 2023 decline potentially already baked in the cake (Exhibit 2). As noted above, however, such a
labor cost deceleration is highly unlikely absent an immediate deep recession this year.
Exhibit 2: Surge In Labor Costs Typically Followed By Profit Margin Declines.
% Domestic Pretax
Domestic PretaxProfit-Margin
Profit MarginProxy
Proxy(based
(basedonongross
GDP data, %, Left
domestic Scale)(GDP) data, %, Left Scale)
product %
Employment
EmploymentCost
CostIndex
Index(Y/Y%
(Y/Y %change,
change,leading 5 quarters,
leading Right
5 quarters, Scale,
Right Inverted)
Scale, Inverted)
20 0
18 1
16 2
14 3
12 4
10 5
8 6
6 7
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

Gray areas represent recession periods. Sources: Bureau of Labor Statistics; Bureau of Economic Analysis/Haver Analytics. Data as
of March 2, 2023.

All in all, the economy is likely to lose further momentum, one way or another, with
employment and real GDP the next shoes to drop. Basically, the labor market strength of the
past year has sowed the seeds of its own destruction, with more declines on the profit
margins, hiring and economic growth fronts highly likely in coming quarters. The roughly
10% drop in S&P 500 company margins already reported for Q4 seems consistent with the
negative signals coming from the correlation between surging labor costs and profit
margins. If this correlation is any indication, a bigger drop in profit margins is baked in the
cake over the next four quarters. How persistent and damaging to margins, hiring, capital
expenditures (capex) and equity market prospects the effect of the surge in labor costs to
date turns out to be depends on how soon and how much labor cost growth decelerates.
The prospect of a continuing sharp drop in profit margins combined with declining
business pricing power following a year of abrupt money supply growth deceleration,
slowing consumer spending, and tightening lending conditions suggests that more
persistent than generally anticipated headwinds for Equities are in store. In this context,
we are not surprised to see financial markets pare back their early-year exuberance while
awaiting evidence about the direction of the economy and interest rates.

3 of 8 March 6, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

MARKET VIEW
Powell vs. the $26 Trillion Hydra-headed Beast
Lauren J. Sanfilippo, Director and Senior Investment Strategy Analyst
Investment Implications
Calls for a U.S. recession have been rolling for months now—the downturn that was to begin
We remain tactically neutral across
at the end of 2022 was subsequently pushed into early 2023, although those forecasts have
now been recast for the back half of this year. This begs the question: After one of the most Equities and bonds and cautious
aggressive monetary tightening cycles in decades—with the fed funds rate rocketing from a on risk assets, generally. Continue
0.00%–0.25% target range in March 2022 to 4.50%–4.75% in February 2023—how and to maintain a high level of
why has the economy proven so resilient? The answer lies in part in the dynamic and diverse diversification across asset classes
nature of the U.S. economy. Whether industry by industry, state to state or sector by sector, and focus on higher-quality
the Fed is learning it’s not easy wrestling with a $26 trillion hydra-headed beast. investments through the slowing
growth scenario and necessary
We are mindful of the multiple challenges in front of the U.S. economy, including a growth
reset ahead for earnings, which
slowdown, a deteriorating profit cycle, a consumer now defaulting at pre-pandemic rates,
favors higher-quality, total
and housing affordability at a record low. Layer on a tired physical infrastructure,
burdensome entitlement expenditures, the 2024 political cycle seemingly underway and a return/dividend payers.
widespread opioid crisis—the list goes on.
But all the doom and gloom around the ominous recession call and a domineering news cycle
distracts from the fact that no economy in the world produces as much annual output ($26
trillion) with as few people (less than 5% of the global population) across so many sectors.
A Hydra-headed Superpower
The U.S. is a superpower in many industries and activities: agriculture, aerospace, energy,
technology, financial services, pharmaceuticals, higher education and entertainment. As housing
activity has rolled over and manufacturing has contracted, the offset has been a pickup in
services activities like travel and leisure, arts, entertainment and recreation. The U.S. economy
isn’t a one-trick pony—in fact, standalone sectors/activities in the U.S. are greater than most
nations’ output. America’s $2.8 trillion in manufacturing activity is equivalent to the total annual
output of France; our transportation and warehousing industry is comparable to Taiwan’s entire
output. Exhibit 3A serves as a visual of how dynamic and multifaceted the U.S. economy is
across industries as compared to similar size economies.
Exhibit 3: Sizing Up The U.S. Economy Industry-by-Industry and State-by-State.
3A) U.S. Industries Measure Up to Full Economies. 3B) Recession-like Conditions in 16 U.S. States.
States Registering Negative Monthly Change
Professional & Business Services
India 50
Real Estate
United Kingdom
Manufacturing 40
France
Finance & Insurance
Italy
Health Care 30 Average
Korea threshold = 26
Retail
Mexico
20
Arts & Recreation
Indonesia
Construction
Netherlands
10
Transportation & Warehousing
Taiwan
Mining
Norway 0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Billions of USD

Exhibit 3A: Sources: Bureau of Economic Analysis (BEA); International Monetary Fund. Data as of Q3 2022 for BEA U.S. industries and International Monetary Fund Forecast for 2022 GDP. Exhibit 3B:
Sources: Bloomberg; Philadelphia Federal Reserve. Data as of December 2022. Gray areas represent recession periods.

A key point: Consider the U.S.’s diversity an anomaly, especially among countries where a
whole economy relies on a singular industry, like Germany’s knack for manufacturing, some
commodity or agricultural producers in Latin America, or Taiwan’s dedicated manufacturing
of semiconductors. Japan and South Korea are still levered to consumer electronics and

4 of 8 March 6, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

autos; China’s economy rests on the shoulders of capital investment and real estate. In the
Middle East, think of energy.
Another level of diversification is found on the U.S. state level. Recent migration patterns tell
the story. The South took an influx of “net domestic migration”—like the population headed
to Texas, North Carolina and Florida as the top three recipient states over the last year,
according to the Brookings Institution. No wonder then, the amount of business formation
happening from Texas to the Carolinas. According to the U.S. Census Bureau, with 420,987
applications nationally in the month of January, basically half (47%) were for business
applications in the South region. It’s both businesses and homes—consider that new home
sales data showed the Southern region up 17.1% last month, climbing to the highest
annualized pace in nearly a year. 1 All other regions declined, including a 19.4% slump in the
Northeast. Indicative of the pandemic migration trend away from more urbanized areas, New
York and California are preparing for a decline in personal income tax receipts 2—sorely
missed, thanks to the slowdown in activity in their finance and technology hubs.
Recession-like state economic conditions are tracked by the Philadelphia Fed’s state
coincident index using variables such as nonfarm payroll employment, average hours worked
in manufacturing by production workers, the unemployment rate, and wage and salary
disbursements deflated by the consumer price index. The most recent read suggests 16
states are registering negative monthly change, while on average 26 states is the threshold
number for the Fed to have reasonable confidence that the national economy could enter a
recession. As seen in Exhibit 3B, the indicator is closely correlated with past recessions,
signaling six of the last major recessions. When the Fed started hiking rates in March of
2022, exactly zero states registered negative month-to-month readings. According to the
index, the closest the states have gotten to reaching the threshold has been this past
October, with 23 states registering negative monthly change.
Yet another display of dynamism has been S&P 500 corporate earnings—which, up until the
fourth quarter of 2022, were hanging on to aggregate positive quarterly earnings growth. It’s
another case of offsets—as five of the 11 sectors are reporting year-over-year earnings
growth, led by the Energy and Industrials sectors, helping to partially offset the six sectors
reporting a year-over-year decline in earnings, with the Communication Services, Materials,
and Consumer Discretionary sectors as the biggest detractors. As the Technology sector’s
fortune reversed coming off years of over-earning and over-hiring, the Energy sector’s
contribution to overall index earnings has grown significantly. In aggregate, earnings are
estimated to contract by 4.6% year-over-year over the fourth quarter—without Energy,
closer to -8.7%, and without both the Energy and Industrials sectors, -11.7%. 3
The bottom line: It’s not easy being Fed Chairman Powell
Yes, we expect the U.S. economy to tip into a mild recession over the second half of this
year. In the face of still simmering global inflation, an inverted yield curve, soggy growth in
other parts of the world and the war in Europe (among other concerns), we maintain a bias
toward U.S. assets due in large part to the higher-quality, durable nature of America’s diverse
and dynamic economy.
Luckily, the whole (U.S.) is greater than the sum of its hydra-headed parts (industries/
sectors/states).

1
Census Bureau. Data as of February 2023. Note: The South is the largest region as identified by the Census
Bureau.
2
According to Blomberg, New York’s estimated personal income tax payments in June declined to the lowest level
since 2017. California’s revenue from personal income, corporation and sales taxes will trail projections by $5.5
billion for the year ending in June 2023.
3
Factset. Blended Growth as of March 1, 2023.

5 of 8 March 6, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

THOUGHT OF THE WEEK
U.S. Exports and the $3 Trillion No One is Talking About
Investment Implications
Joseph P. Quinlan, Managing Director and Head of CIO Market Strategy
To add an exclamation point to the preceding piece (Powell vs. the $26 Trillion Hydra- The CIO investment bias remains
headed Beast), U.S. exports of goods and services hit a record high of $3 trillion in 2022 titled toward U.S. assets because
(Exhibit 4). That figure has not received much attention from either the media or Wall we believe Corporate America
Street—but it should. remains among the most
competitive and dynamic in the
Why? Because America’s export prowess underscores the dynamic competitiveness of the
world. Nothing underscores this
U.S. economy. While U.S. exports are often considered a residual or nominal driver of
point like the size and breadth of
growth here in the U.S., what America sells to the rest of the world in a year is roughly
U.S. exports, which hit a record
equivalent to the total output of India. And it’s well in excess of the total output of such
high last year.
nations as South Korea, Spain and Mexico. Just as impressive: Record exports came in the
face of a super strong U.S. dollar last year. Only China exports more to the world than the
U.S.
And speaking of China, U.S. exports (goods) to the mainland hit a record $154 billion last
year, with only North American Free Trade Agreement (NAFTA) partners Mexico and
Canada consuming more U.S. exports, according to the Census Bureau. We highlight this
fact because as U.S-Sino tensions turn more sour than sweet, there’s a great deal of
commerce at stake for U.S. firms, a point we continue to emphasize.
What is America peddling to China and the rest of the world? Answer: plenty according to
the Bureau of Economic Analysis. Think capital goods ($572 billion last year), industrial
supplies ($811 billion), consumer goods ($246 billion), food and beverages ($208 billion),
and autos and auto parts ($158 billion). Add to this list soaring U.S. energy exports (a
record $269 billion) and record service exports (roughly $1 trillion), with the latter
encompassing everything from transport to telecommunications, business services to
financial services. Rarely discussed, service exports now rank as one of America’s top
exports.
On balance, whether it’s soybean or spacecraft, propane or plastics, accounting services or
automobiles, the breadth of U.S. exports is virtually unparalleled. No nation exhibits more
export dynamism than the U.S. That’s the good news. The bad news is that rising U.S.
trade protectionism could undermine the primacy of U.S. exports—and squeeze future
earnings growth of large-cap America. Stay tuned.
Exhibit 4: America As An Exporting Juggernaut.
Trillions of $
3.0

2.5

2.0

1.5

1.0

0.5

0.0

Source: Bureau of Economic Analysis as of March 2, 2023.

6 of 8 March 6, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

MARKETS IN REVIEW

Equities
Total Return in USD (%) Economic Forecasts (as of 3/3/2023)
Current WTD MTD YTD Q4 2022A 2022A Q1 2023E Q2 2023E Q3 2023E Q4 2023E 2023E
DJIA 33,390.97 1.9 2.3 1.2 Real global GDP (% y/y annualized) - 3.4* - - - - 2.6
NASDAQ 11,689.01 2.6 2.1 11.9 Real U.S. GDP (% q/q annualized) 2.7 2.1 1.0 0.5 -1.0 -2.0 1.0
S&P 500 4,045.64 2.0 1.9 5.7 CPI inflation (% y/y) 7.1 8.0 5.8 4.4 3.7 3.2 4.3
S&P 400 Mid Cap 2,648.27 1.9 1.8 9.2 Core CPI inflation (% y/y) 6.0 6.1 5.5 4.9 4.0 3.3 4.4
Russell 2000 1,928.26 2.0 1.7 9.7 Unemployment rate (%) 3.6 3.6 3.4 3.3 3.6 4.1 3.6
MSCI World 2,757.97 1.9 1.6 6.2 Fed funds rate, end period (%) 4.33 4.33 4.88 5.38 5.38 5.38 5.38
MSCI EAFE 2,070.64 1.8 0.9 6.8
MSCI Emerging Markets 988.03 1.7 2.5 3.4 The forecasts in the table above are the base line view from BofA Global Research. The Global Wealth & Investment
Management (GWIM) Investment Strategy Committee (ISC) may make adjustments to this view over the course of the
year and can express upside/downside to these forecasts. Historical data is sourced from Bloomberg, FactSet, and
Fixed Income†
Haver Analytics. There can be no assurance that the forecasts will be achieved. Economic or financial forecasts are
Total Return in USD (%)
inherently limited and should not be relied on as indicators of future investment performance.
Current WTD MTD YTD A = Actual. E/* = Estimate.
Corporate & Government 4.84 0.22 -0.03 0.31 Sources: BofA Global Research; GWIM ISC as of March 3, 2023.
Agencies 4.92 0.02 -0.14 0.02
Municipals 3.65 -0.15 -0.18 0.36
U.S. Investment Grade Credit 4.85 0.12 -0.13 0.28 Asset Class Weightings (as of 2/7/2023) CIO Equity Sector Views
International 5.51 0.42 0.21 0.91 CIO View CIO View
High Yield 8.55 0.78 0.31 2.79 Asset Class Underweight Neutral Overweight Sector Underweight Neutral Overweight
neutral yellow

90 Day Yield 4.84 4.78 4.77 4.34

Overweight green

Global Equities     Healthcare    

2 Year Yield 4.86 4.81 4.82 4.43
Neutral yellow
Slight overweight green

U.S. Large Cap Growth     Energy    

10 Year Yield 3.95 3.94 3.92 3.87
Slight overweight green

U.S. Large Cap Value    

Slight overweight green

Financials    
30 Year Yield 3.88 3.93 3.92 3.96 US. Small Cap Growth
neutral yellow

    Slight overweight green

neutral yellow
Utilities    
US. Small Cap Value    
Commodities & Currencies Slight underweight orange Consumer Neutral yellow

   
International Developed     Staples
Total Return in USD (%) Emerging Markets
Neutral yellow

   
Neutral yellow

Industrials    
Commodities Current WTD MTD YTD Neutral yellow

Global Fixed Income    

Real Estate
Neutral yellow

   
Bloomberg Commodity 238.01 2.7 2.1 -3.2 Slight overweight green

U.S. Governments    
WTI Crude $/Barrel†† 79.68 4.4 3.4 -0.7 neutral yellow Information neutral yellow

   
U.S. Mortgages     Technology
Gold Spot $/Ounce†† 1856.48 2.5 1.6 1.8 Neutral yellow

U.S. Corporates
slight underweight orange

    Materials    
Total Return in USD (%)
Slight underweight orange

High Yield    
Consumer underweight red

Prior Prior 2022    

U.S. Investment Grade Neutral yellow

   
Discretionary
Currencies Current Week End Month End Year End Tax Exempt Communication Underweight red

EUR/USD 1.06 1.05 1.06 1.07    

Slight underweight orange

U.S. High Yield Tax Exempt     Services

USD/JPY 135.87 136.48 136.17 131.12 International Fixed Income
neutral yellow

   
USD/CNH 6.90 6.98 6.95 6.92
Cash
CIO asset class views are relative to the CIO Strategic Asset Allocation (SAA) of a multi-asset portfolio.
S&P Sector Returns Source: Chief Investment Office as of February 7, 2023. All sector and asset allocation 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
Materials 4.2%
best interest of all investors.
Industrials 3.3%
Communication Services 3.3%
Energy 3.1%
Information Technology 2.9%
Consumer Discretionary 1.7%
Real Estate 1.6%
Financials 0.9%
Healthcare 0.5%
Consumer Staples -0.3%
Utilities -0.5%
-1% 0% 1% 2% 3% 4% 5%

Sources: Bloomberg; Factset. Total Returns from the period of

2/27/2023 to 3/3/2023. †Bloomberg Barclays Indices. ††Spot price
returns. All data as of the 3/3/2023 close. Data would differ if a
different time period was displayed. Short-term performance shown
to illustrate more recent trend. Past performance is no guarantee
of future results.

7 of 8 March 6, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

Index Definitions
Securities indexes assume reinvestment of all distributions and interest payments. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest
directly in an index. Indexes are all based in U.S. dollars.
S&P 500 Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the index focuses on the large-cap segment of the market, with
approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market.
Bureau of Labor Statistics Consumer Price Index is a measure of the average change over time in the prices paid by consumers for a representative basket of consumer goods and services.
Institute for Supply Management (ISM) Index measures the change in production levels across the U.S. economy from month to month.
Conference Board Index of Leading Indicators (LEI) is an American economic leading indicator intended to forecast future economic activity.
Employment Cost Index essentially measures the change in total employee compensation each quarter.
Bureau of Labor Statistics’ Employment Cost Index (ECI) measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries.
Philadelphia Fed state coincident index includes four indicators: nonfarm payroll employment, the unemployment rate, average hours worked in manufacturing and wages and salaries. The
trend for each state's index is set to match the trend for gross state product.
Sectors: Consumer Discretionary, Consumer Staples Energy, Financials, Healthcare, Industrials, Information Technology, Materials, Real Estate, Communication Services, Utilities) structure consists
of 11 sectors, 24 industry groups, 69 industries and 158 sub-industries into which S&P has categorized all major public companies.

Important Disclosures
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
This material does not take into account a client’s particular investment objectives, financial situations, or needs and is not intended as a recommendation, offer, or solicitation for the purchase or
sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between
brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the
differences, particularly when determining which service or services to select. For more information about these services and their differences, speak with your Merrill financial advisor.
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.").
The Global Wealth & Investment Management Investment Strategy Committee (“GWIM ISC”) is responsible for developing and coordinating recommendations for short-term and long-term
investment strategy and market views encompassing markets, economic indicators, asset classes and other market-related projections affecting GWIM.
BofA Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC and wholly owned subsidiary of
Bank of America Corporation.
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.
Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.
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.
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. Small cap and mid cap companies pose special risks, including possible illiquidity and greater price volatility
than funds consisting of larger, more established companies. 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. Bonds are subject to
interest rate, inflation and credit risks. 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. 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.
These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.
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. Investing directly in Master Limited Partnerships, foreign equities, commodities or other investment strategies discussed in this document, may not be available
to, or appropriate for, clients who receive this document. However, these investments may exist as part of an underlying investment strategy within exchange-traded funds and mutual funds.
Alternative Investments are speculative and involve a high degree of risk.
Alternative investments are intended for qualified investors only. Alternative Investments such as derivatives, hedge funds, private equity funds, and funds of funds can result in higher return
potential but also higher loss potential. Changes in economic conditions or other circumstances may adversely affect your investments. Before you invest in alternative investments, you should
consider your overall financial situation, how much money you have to invest, your need for liquidity, and your tolerance for risk.
Nonfinancial assets, such as closely held businesses, real estate, fine art, oil, gas and mineral properties, and timber, farm and ranch land, are complex in nature and involve risks including total loss
of value. Special risk considerations include natural events (for example, earthquakes or fires), complex tax considerations, and lack of liquidity. Nonfinancial assets are not in the best interest of all
investors. Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax,
or estate planning strategy.
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