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CHIEF INVESTMENT OFFICE

Capital Market Outlook

August 5, 2024

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

IN THIS ISSUE MACRO STRATEGY 


Macro Strategy—The Ghosts of August: What’s Spooking the Markets and Where do Joseph P. Quinlan
We Go from Here?: August is typically a volatile time for markets, and this year is no Managing Director and Head of CIO Market Strategy
different. Six factors have emerged to rattle the markets: 1), the belief that the Federal
MARKET VIEW 
Reserve (Fed) is behind the curve in cutting interest rates; 2), that U.S. and Chinese
consumers are retrenching; 3), the unwinding of the Artificial Intelligence (AI) trade; 4), the Emily Avioli
unwinding of the yen-carry trade; 5), the prospects of a tight/close U.S. election in Vice President and Investment Strategist
November; and 6), rising geopolitical tensions in the Middle East.
THOUGHT OF THE WEEK 
That said, our base case has not changed and pivots on the following: Buy U.S. Equities on David Litvack
weakness; stay in the market—timing the market is a fool’s errand; stay U.S.-centric—U.S. Managing Director and Tax Exempt Strategist
assets remain core holdings of portfolios; U.S. elections matter, but economic growth and
earnings matter more to returns; and the potential benefits of AI are still in front of us— MARKETS IN REVIEW 
owing to the coming boost in productivity and operating leverage, the corporate earnings
backdrop remains favorable over the long run. Data as of 8/5/2024,
and subject to change
Market View—Three Investment Takeaways from the Market’s Summer Shake-Up:
July was a wild ride for equity markets. Returns were dragged lower by the same mega-
Portfolio Considerations
cap darlings that have powered this year’s bull market, interest rate sensitive areas like
Small-caps were suddenly back in the spotlight as expectations for easier monetary policy We maintain an overweight to
were pulled forward, and dormant measures of volatility sprang back to life. Equities, with a preference for higher
quality U.S. Large- and Small-caps.
Last month’s market tumult serves as an opportunity to reflect on the core principles of We continue to incorporate cyclical-
investing, especially considering our view that the potential for episodic volatility is likely value exposure in our sector views by
to persist for the remainder of the year. Our three key investment takeaways: 1) avoid maintaining overweight allocations to
overexposure to any one area of the market, 2) stay balanced and diversified, and 3) stick areas like Energy, Industrials and
to a disciplined investment process. Consumer Discretionary and
Thought of the Week—Is the Muni Tax Exemption in Jeopardy?: The unsustainable emphasize Healthcare to reflect a
path of the federal fiscal deficit and sunsetting provisions of the 2017 Tax Cuts and Jobs balance between Value and Growth.
Act could cause Congress to reconsider many tax expenditures within the U.S. tax code, We still favor a significant allocation
possibly including the municipal bond tax exemption. to bonds in a diversified portfolio, re-
While some tinkering around the edges is possible, all previous muni bond tax reforms affirm our view to be slightly long
have been on a going-forward, not a retroactive basis. We believe any legislation that duration and reiterate our preference
limits future tax-exempt issuance should only make valuations on existing municipal bonds for rate risk over credit risk generally
richer. within Fixed Income.
We view weak episodes in the
markets as a buying opportunity for
long-term Equity investors.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment
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. 6851770 7/2024
MACRO STRATEGY
The Ghosts of August: What’s Spooking the Markets and Where do
We Go from Here?
Joseph P. Quinlan, Managing Director and Head of CIO Market Strategy
Investment Implications
It’s early August but the month is already living up to its reputation as being among
the most volatile for the capital markets. In brief, here are six factors creating We expect the markets to remain
concerns and volatility in the markets: volatile and choppy over the near-
term but continue to recommend
Concern #1: The Fed is behind the curve in cutting interest rates in the face of that investors buy on weakness
weakening U.S. economic indicators, namely the jump in the U.S. unemployment and stay in the market.
rate to 4.3% in July. The economy added only 114,000 jobs last month, the slowest
rate of gain since last year. The jobless rate has climbed by nearly one percentage
point in the past year and comes alongside other factors pointing to slower
economic growth like the downturn in manufacturing Institute for Supply
Management Purchasing Managers’ Index and rising credit card delinquencies. The
fed funds futures market is now pricing in an 85% probability of a 50 basis point
(bps) cut in September and a 63% probability for another 25 bps in November.
Concern #2: That U.S. and Chinese consumers are pulling back and retrenching,
undercutting the twin engines of global consumption since the U.S. and China,
combined, account for a staggering 44% of global consumption according to figures
from the United Nations. While Q2 U.S. earnings have come in solidly in most cases,
one underlying theme from a number of firms has been flagging/weakening U.S.
consumer demand amid higher costs of goods and services. Both discretionary and
non-discretionary spending in the U.S. has softened this year, prompting concerns
that the almighty U.S. consumer, accounting for nearly 70% of U.S. gross domestic
product, is set to rollover. While lower income households in the U.S. have pulled
back on spending this year, the negative wealth effects from swooning U.S. Equities
could cool spending among higher-income households in the months ahead, piling
on more downside pressure on U.S. economic prospects.
Concern #3: The unwinding of the AI trade as investors start to question the
massive capital spending plans of Large-cap technology companies juxtaposed
against when the transformational effects of AI will begin to pay off for technology
firms and the economy in general. U.S. technology leaders have spent billions on the
buildout of the AI infrastructure this year, and signaled to investors they were not
done during Q2 earnings calls. The messaging didn’t go down well, triggering a
rethink and selloff along the technology complex as investors weigh the costs of the
AI revolution versus expected returns. Not helping matters, the unwinding of the yen
carry trade.
Concern #4: The unwinding of the yen carry trade as the Bank of Japan (BoJ) raises
rates much faster-than-expected and pulls back on bond buying. A hawkish BoJ is a
clear signal that the decade of ultra-easy monetary policy is over in Japan; the yen
has surged by over 13% since July 10, undermining the popular yen-funded carry
trade among investors. Meanwhile, as a funding currency, the yen has helped fuel
and fund demand for U.S. technology stocks—ergo, the unwinding of the yen carry
trade has filtered into the downdraft in U.S. big technology. It’s also hammered the
technology-heavy indexes of Taiwan and South Korea—technology makes up 78%
of the MSCI Taiwan Index and nearly 50% of the MSCI South Korea Index.
Concern #5: That the U.S. election will be tighter than originally thought given that
Kamala Harris, not President Biden, has emerged as the Democratic nominee. Prior
to President Biden stepping aside, the markets grew comfortable with the notion
that Donald Trump would be re-elected president in November, taking out the
drama and uncertainty of the November vote. The script has been flipped, however,

2 of 8 August 5, 2024 – Capital Market Outlook RETURN TO FIRST PAGE


with the unexpected turn in the Democratic ticket. Various polls point to a very tight
race for the White House, which is expected to add to market volatility between now
and election day.
Concern #6: That rising geopolitical tensions in the Middle East—pitting regional
heavyweights Israel vs Iran—boil over, sparking a greater regional conflict that
imperils a large share of the world’s oil supplies. The markets have come to discount
geopolitical risks in Ukraine, the Middle East and the South China Sea, although
sentiment can quickly turn negative and add to market gloom/volatility with each
new incident of violence.
Where do we good from here?
Given all the moving parts of the moment, we expect the U.S. and global markets to
remain volatile and choppy over the near-term. But our base case has not changed
and pivots on the following:
• Buy U.S. Equities on weakness
• Stay in the market—timing the market is a fool’s errand
• Stay U.S.-centric—U.S. assets remain core holdings of portfolios
• U.S. elections matter, but economic growth and earnings matter more to
returns
• The potential benefits of AI are still in front of us—owing to the coming boost
in productivity and operating leverage, the corporate earnings backdrop
remains favorable over the long run.
From a macro perspective, a U.S. recession remains a distant concern at this point.
BofA Global Research is not forecasting a recession. We believe many parts of the
economy—the labor “market”, savings rate, interest rates, retail sales—are
normalizing following the anomalies created by the pandemic.
In addition, corporate earnings remain healthy, likely to grow 10% this year.
And finally, during times of market spasms, it helps to step back and remember that
no economy in the world is as large, diverse and wealthy as the U.S. economy.
Episodes of market volatility have been typically followed by resets and an upward
grind in Equities. This time, we believe, will be no different.
Exhibit 1: A Longer-term View of the VIX 1 Spiking Around Significant Events.

VIX Index Level


85 2 6 1
75 0.9
0.8
65
0.7
55 3 4 0.6
1
45 5 0.5
VIX = 40
35 0.4
0.3
25
0.2
15 0.1
5 0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

Gray bars represent recessionary periods. Note: The numbered bear markets correspond to the following events: 1) Post dot-com
bubble, 2) Global financial crisis, 3) Europe sovereign debt crisis, 4) U.S. credit downgrade, 5) China currency devaluation,
6) Pandemic. Sources: Bloomberg, Yardeni Research. Data as of August 5, 2024. Indexes are unmanaged and do not take
into account fees or expenses. It is not possible to invest directly in an index. Past performance is no
guarantee of future results.

1
Volatility Index.

3 of 8 August 5, 2024 – Capital Market Outlook RETURN TO FIRST PAGE


MARKET VIEW
Three Investment Takeaways from the Market’s Summer Shake-Up
Emily Avioli, Vice President and Investment Strategist
The S&P 500 ended July with an unassuming monthly total return of 1.2%, but a peek below Investment Implications
the index level reveals a more complicated picture. In what was dubbed by some as “the
great rotation,” returns were dragged lower by the same mega-cap darlings that powered July was a wild ride for markets,
the equity market rally in the first half of the year. Interest rate sensitive areas like Small- and, in our view, the potential for
caps were suddenly back in the spotlight as expectations for easier monetary policy were episodic volatility is likely to persist.
pulled forward. Meanwhile, long-dormant measures of equity market volatility stirred in the During periods of heightened
background. Parsing through the noise, we find three key investment takeaways from the uncertainty, we continue to
market’s summer shake-up. emphasize core principles of
1. “Mag 7 2” to “Lag 7” underscores the pitfall of overexposure: The mega-cap tech investing, including balance,
stocks that are largely responsible for fueling this year’s bull market stumbled in July. diversification and maintaining a
After returning 37.0% in the first half of the year, the infamous Mag 7 saw an intra- disciplined process.
month peak-to-trough decline of -12.9%. 3 The pullback can be attributed to a
confluence of factors, including growing concerns about extended valuations and
repositioning amid concentration risk. Profits were in focus as several high-profile
earnings misses cast doubt that massive investments in AI will see near-term returns.
An additional blow was dealt mid-month by a report that the U.S. is considering trade
restrictions that could curb semiconductor business in China. While dip buying toward
month-end helped to limit losses on a monthly basis, a resumption of weakness in early
August ultimately led the Nasdaq 100 into correction territory.
Investment Implications: AI remains a long-term theme for us, and we ultimately expect
that related investments will continue to see momentum. But July’s sudden reversal acts as a
healthy reminder that the leaders of the market today may look different from the leaders of
the future. We suggest emphasizing long-term innovation themes as a part of a balanced
portfolio while avoiding overexposure to any one area of the market.
Exhibit 2: The Mag 7 Stumbled Last Month.
111
109 Mag 7 S&P 500
Indexed to 100 as of

107
June 28, 2024

105
103
101
99
97
95
7/1/2024

7/3/2024

7/5/2024

7/7/2024

7/9/2024

7/11/2024

7/13/2024

7/15/2024

7/17/2024

7/19/2024

7/21/2024

7/23/2024

7/25/2024

7/27/2024

7/29/2024

7/31/2024

Bloomberg Mag 7 Index referenced. Source: Bloomberg. Data as of July 31, 2024. Performance results are extremely short term
and do not provide an adequate basis for evaluating performance potential over varying market conditions or economic cycles.
Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest
directly in an index. Past performance is no guarantee of future results.
2. “Small-cap Summer” argues for diversification: Expectations for easier monetary
policy were pulled forward after a promising consumer price index report last month,
lifting interest rate-sensitive areas of the market. Small-caps, which typically benefit
from lower borrowing costs due to higher debt levels, saw an especially impressive run-
up. The Russell 2000 returned an eye-popping 10.2% in July, marking the third-largest
monthly outperformance versus the S&P 500 on record (Exhibit 3). An anticipated
profits recovery also provided a boost amid estimates for YoY Small-cap earnings
growth to flip positive and slightly outpace S&P 500 YoY earnings growth beginning in
Q3. 4 While Small-caps took the spotlight last month, it’s worth noting that the rally
extended to other unloved areas of the market, including Value-oriented, cyclical
pockets. Real Estate and Financials were among the top-performing sectors in the S&P
2
Magnificent 7: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla.
3
Bloomberg. Data as of July 31, 2024. Refers to decline in the Bloomberg Mag 7 Index from 7/10/2024 to 7/30/2024.
4
FactSet Earnings Scorecard. Data as of July 30, 2024. S&P 600 Index vs. S&P 500 Index estimated YoY earnings per
share growth for Q3 2024 referenced.

4 of 8 August 5, 2024 – Capital Market Outlook RETURN TO FIRST PAGE


500 with total returns of 7.2% and 6.5% and Value outpaced Growth by 6.8%. 5
Improvement in measures of market breadth reflects that strength was relatively broad-
based, with the S&P 500 Equal Weighted Index beating the market cap weighted
version for three straight weeks in July, ultimately outpacing it by 3.3% for the month. 6
Investment Implications: We continue to emphasize exposure to U.S. Small-caps and
select cyclical and Value-oriented sectors on expectations for resilient economic growth, a
broadening profits cycle, and easier monetary policy, but risks to this rate-sensitive rally
remain as evidenced by early August weakness. Recent market action highlights the
importance of spreading investments across various asset classes within a portfolio to take
advantage of unexpected shifts. We suggest a disciplined and balanced approach for long-
term investors.
Exhibit 3: Small-cap vs. Large-cap Monthly Total Returns.
Small-cap vs. Large-cap Monthly Outperformance
(Russell 2000 Index - S&P 500 Index Total Return (%))
15
Most monthly Rusesell 2000 vs. S&P outperformance
10 since Feb. 2000

5
0
-5
-10
Apr-80

Aug-82

Apr-87

Aug-89

Apr-94

Aug-96

Apr-01

Aug-03

Apr-08

Aug-10

Apr-15

Aug-17

Apr-22
Feb-79

Oct-83
Dec-84
Feb-86

Oct-90
Dec-91
Feb-93

Oct-97
Dec-98
Feb-00

Oct-04
Dec-05
Feb-07

Oct-11
Dec-12
Feb-14

Oct-18
Dec-19
Feb-21
Jun-81

Jun-88

Jun-95

Jun-02

Jun-09

Jun-16

Jun-23
Source: Bloomberg. Data as of July 31, 2024. Indexes are unmanaged and do not take into account fees or expenses. It is not possible to invest directly in an index.
Past performance is no guarantee of future results.
3. VIX spike highlights importance of discipline: After an unusually sanguine stretch
for markets, measures of equity market volatility sprang back to life during July’s market
tumult. Churn extended into the early trading days of August, with the Chicago Board
Options Exchange VIX closing above 23 for the first time since March 2023. After a
period of relative tranquility, this development serves as an important reminder that
volatility is considered normal. The VIX’s long-term average is 19.5, and surges well
above that figure are not uncommon. Take the turbulent market of 2020, for example,
when the VIX closed above the 25 level 154 times throughout the year (Exhibit 4).
Market pullbacks, which often accompany higher volatility, are also common, with 5%
drawdowns occurring three times a year on average for the S&P 500 since 1930. 7 Last
month’s churn highlights the importance of having a disciplined investment plan in place
to weather the market’s inevitable twists and turns.
Investment Implications: The potential for episodic volatility persists amid the upcoming
U.S. presidential election, softening economic data and elevated geopolitical risk. We
emphasize the importance of staying invested during periods of uncertainty and continue to
see market weakness as a buying opportunity for long-term investors.
Exhibit 4: Spikes in Volatility, While Subdued as of Late, Are Historically Common.
# of days that the VIX closed above 25
175
150
125
100
75
Average since 2000
50
25
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

Source: Bloomberg. Data as of July 31, 2024. Indexes are unmanaged and do not take into account fees or expenses. It is not
possible to invest directly in an index. Past performance is no guarantee of future results.

5
Bloomberg. Data as of July 31, 2024. Russell 1000 Value Index and Russell 1000 Growth Index referenced.
6
Bloomberg. Data as of July 31, 2024.
7
BofA Global Research. November 3, 2023. Latest data available.

5 of 8 August 5, 2024 – Capital Market Outlook RETURN TO FIRST PAGE


THOUGHT OF THE WEEK
Is the Muni Tax Exemption in Jeopardy?
David Litvack, Managing Director and Tax-Exempt Strategist
We believe Congress will need to address the unsustainable path of the nation’s fiscal Investment Implications
deficit next year when it decides what to do about sunsetting provisions in the 2017 Tax
Investors need not avoid municipal
Cuts and Jobs Act (TCJA). To avoid raising tax rates on large segments of the population,
bonds on concerns that the muni
there will likely be a reconsideration of many so-called “tax expenditures,” i.e., exclusions,
bond tax exemption will be taken
exemptions, deductions and other tax reductions within the U.S. tax code. This could
away, which we view as unlikely.
include the municipal bond tax exemption.
While some tinkering around the
Interest on municipal bonds has been exempt from federal income taxes since the edges is possible, all previous muni
establishment of the federal income tax code in 1913. However, the muni tax exemption is bond tax reforms have been on a
not a constitutional right, but rather a legislative grant to the states by Congress, and going-forward, not a retroactive
therefore subject to revision (U.S. Supreme Court, South Carolina v. Baker, 1988). In fact, basis. We believe any legislation
various reforms have been made to limit the municipal bond tax exemption, notably with that limits future tax-exempt
the Tax Reform Act of 1986 and more recently with the TCJA, which permanently issuance should only make
eliminated tax-exempt advance refundings after 2017 (Exhibit 5). valuations on existing municipal
Exhibit 5: Tax-exempt Muni Issuance Declined After TCJA. bonds richer.

2018 2019 2020 2021 2022 2023


0%

-5%

-10%

-15%

-20%

-25%

-30%

Decrease in tax exempt issuance as a % of 2017 issuance

Source: London Stock Exchange Group, as of July 31, 2024.


The muni bond tax exemption costs the federal government $372 billion over 10 years,
according to the U.S. Treasury Department. This is not nearly as expensive as some other
tax expenditure such as medical insurance premiums ($3.44 trillion), net imputed rental
income ($1.95 trillion), employer defined contribution retirement plans ($1.90 trillion), and
capital gains ($1.57 trillion). However, it is enough to draw scrutiny, particularly because it
does not benefit a large segment of the population; only 4% of personal income tax
returns report tax exempt income, and 66% of those are from taxpayers earning over
$100,000 in adjusted gross income according to the Internal Revenue Service.
State and local government finance officers will argue that the municipal bond tax
exemption is an important and effective tool for the country to maintain and modernize its
infrastructure. We agree with this position. However, within Congress, the tax exemption
of municipal bonds has critics on both sides of the political spectrum, with some fiscal
conservatives viewing it as encouraging wasteful spending and some liberals viewing it as
simply a tax loophole for the rich.
We believe it is very unlikely the municipal tax exemption will be completely eliminated.
However, Congress could remove a subset of tax-exempt muni issuance, such as private
activity bonds. This would not be a reason for investors to avoid tax-exempt munis though.
All previous muni bond tax reforms have been on a going-forward, not a retroactive basis,
and we believe this would continue to be the case. We believe any legislation that reduces
future tax-exempt issuance should make valuations on existing municipal bonds even
richer.

6 of 8 August 5, 2024 – Capital Market Outlook RETURN TO FIRST PAGE


MARKETS IN REVIEW

Equities
Total Return in USD (%) Economic Forecasts (as of 8/2/2024)
Current WTD MTD YTD 2024E Q1 2024A Q2 2024A Q3 2024E Q4 2024E 2025E
DJIA 39,737.26 -2.1 -2.7 6.6 Real global GDP (% y/y annualized) 3.2 - - - - 3.3
NASDAQ 16,776.16 -3.3 -4.7 12.2 Real U.S. GDP (% q/q annualized) 2.7 1.4 2.8 2.5 2.0 2.2
S&P 500 5,346.56 -2.0 -3.2 13.0 CPI inflation (% y/y) 2.9 3.2 3.2 2.7 2.5 2.2
S&P 400 Mid Cap 2,948.01 -4.1 -4.8 6.9 Core CPI inflation (% y/y) 3.4 3.8 3.4 3.2 3.1 2.7
Russell 2000 2,109.31 -6.7 -6.4 4.9 Unemployment rate (%) 3.9 3.8 4.0 4.0 4.0 4.1
MSCI World 3,448.80 -2.1 -3.4 9.8 Fed funds rate, end period (%) 5.13 5.33 5.33 5.38 5.13 4.13
MSCI EAFE 2,291.33 -2.0 -3.8 4.3
MSCI Emerging Markets 1,061.23 -1.0 -2.2 5.5 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
Fixed Income† year and can express upside/downside to these forecasts. Historical data is sourced from Bloomberg, FactSet, and
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 4.26 2.35 1.50 3.08 Sources: BofA Global Research; GWIM ISC as of August 2, 2024.
Agencies 4.25 1.42 0.96 3.32
Municipals 3.42 1.03 0.95 1.46
U.S. Investment Grade Credit 4.35 2.43 1.58 3.21 Asset Class Weightings (as of 7/9/2024) CIO Equity Sector Views
International 4.94 2.06 1.20 3.11 CIO View CIO View
High Yield 7.70 -0.05 -0.31 4.26 Asset Class Underweight Neutral Overweight Sector Underweight Neutral Overweight
90 Day Yield 5.17 5.29 5.28 5.33
slight over weight green

Global Equities    
slight over weight green

Energy    
2 Year Yield 3.88 4.38 4.26 4.25
Neutral yellow

U.S. Large Cap Growth    


slight over weight green

Healthcare    
10 Year Yield 3.79 4.19 4.03 3.88 U.S. Large Cap Value
Slight over weight green

   
30 Year Yield 4.11 4.45 4.30 4.03 Consumer slight over weight green

   
slight over weight green

U.S. Small Cap Growth     Discretionary


slight over weight green

U.S. Small Cap Value    


slight over weight green

Industrials    
Commodities & Currencies International Developed
Slight underweig ht orange

   
Total Return in USD (%) Information Neutral yellow

   
Neutral yellow

Emerging Markets     Technology


Commodities Current WTD MTD YTD slight underweig ht orange

Global Fixed Income     Communication


Bloomberg Commodity 224.47 -1.2 -1.8 -0.9
Neutral yellow

   
Services
slight over weight green

U.S. Governments    
WTI Crude $/Barrel†† 73.52 -4.7 -5.6 2.6 Slight over weight green Neutral yellow

Gold Spot $/Ounce†† 2443.24 2.3 -0.2 18.4 U.S. Mortgages     Financials    
Slight underweig ht orange

U.S. Corporates
Neutral yellow

    Real Estate    
Total Return in USD (%) International Fixed Income
neutral yellow

   
slight underweig ht orange

Utilities    
Prior Prior 2022 Slight underweig ht orange

High Yield     slight underweig ht orange

Currencies Current Week End Month End Year End Materials    


U.S. Investment-grade slight underweig ht orange

   
EUR/USD 1.09 1.09 1.08 1.10 Tax Exempt Consumer underweight red

   
USD/JPY 146.53 153.76 149.98 141.04 Staples
Slight underweig ht orange

U.S. High Yield Tax Exempt    


USD/CNH 7.16 7.26 7.23 7.13
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 July 9, 2024. All sector and asset allocation recommendations must be considered in the
Consumer Discretionary -4.3% context of an individual investor's goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be in the best
Information Technology
interest of all investors.
-4.0%
Energy -3.6%
Financials -3.0%
Industrials -2.8%
Materials -1.4%
Healthcare 0.7%
Consumer Staples 1.2%
Communication Services 1.3%
Real Estate 2.8%
Utilities 4.4%
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

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


7/29/2024 to 8/2/2024. †Bloomberg Barclays Indices. ††Spot price
returns. All data as of the 8/2/2024 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 August 5, 2024 – 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 is a market-capitalization-weighted index that is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers
approximately 80% of available market capitalization.
MSCI Taiwan Index is designed to measure the performance of the large and mid-cap segments of the Taiwan market.
MSCI South Korea Index is designed to measure the performance of the large and mid cap segments of the South Korean market.
Institute for Supply Management Purchasing Managers’ Index is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at manufacturing firms nationwide.
Consumer price index is a price index, the price of a weighted average market basket of consumer goods and services purchased by households.
S&P 500 Equal Weighted Index is the equal-weight version of the widely-used S&P 500. The index includes the same constituents as the capitalization weighted S&P 500, but each company in
the S&P 500 EWI is allocated a fixed weight - or 0.2% of the index total at each quarterly rebalance.
Bloomberg Magnificent 7 Index is an equal-dollar weighted equity benchmark consisting of a fixed basket of 7 widely-traded companies classified in the United States and representing the
Communications, Consumer Discretionary and Technology sectors.
Nasdaq 100 Index is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange.
S&P 600 Index covers roughly the small-cap range of American stocks, using a capitalization-weighted index.
Chicago Board Options Exchange Volatility Index (VIX) is the ticker symbol and the popular name for the Chicago Board Options Exchange's CBOE Volatility Index, a popular measure of the
stock market's expectation of volatility based on S&P 500 index options.
Small-cap/Russell 2000 Index is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell Index.
Russell 2000 Index Total Return tracks the roughly 2000 securities that are considered to be US small cap companies that measures the performance of a group of components by assuming that
all cash distributions are reinvested, in addition to tracking the components' price movements.
S&P 500 Index Total Return is a total return index that reflects both changes in the prices of stocks in the S&P 500 Index as well as the reinvestment of the dividend income from its underlying
stocks.
Russell 1000 Value Index measures the performance of the large- cap value segment of the US equity universe.
Russell 1000 Growth Index measures the performance of the large- cap growth segment of the US equity universe.

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.
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. Municipal securities can be significantly affected by political changes as well as uncertainties in the municipal market related to taxation, legislative changes,
or the rights of municipal security holders. 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. Investments in high-yield bonds
(sometimes referred to as “junk bonds”) offer the potential for high current income and attractive total return, but involves certain risks. Changes in economic conditions or other circumstances
may adversely affect a junk bond issuer’s ability to make principal and interest payments. 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 foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial
volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. 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.
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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