Merrill advises clients to make these moves amid heightened volatility

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The volatility that has gripped the markets for weeks has some investors wondering, “Is this the bottom?

But waiting for that market bottom can be elusive.

“There is no ‘bottom’,” said Chris Hyzy, chief investment officer at Merrill and Bank of America Private Bank. “We are in the middle of a trough process.”

This can be resolved over time, Hyzy added.

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Additionally, two catalysts can help improve investor sentiment.

The first is peak inflation. “We expect that to happen in the next two months,” Hyzy said, and the other would be strong earnings heading into 2023.

“If these two elements converge, investor psychology will improve over the next 12 to 18 months,” Hyzy said.

Inflation data released on Friday pointed to potentially slower price increases, helping to lift stocks midday and position the Dow Jones Industrial Average to possibly break an eight-week losing streak.

One of the reasons this bout of volatility has market analysts concerned is that stocks and bonds have seen higher than normal turnover. Bond and stock volatility have not been so closely correlated since 1994, Hyzy noted.

“It’s new to a variety of new investors, and it’s a story that the more experienced investor didn’t want to see again,” Hyzy said.

Rebalancing opportunity

For investors and advisors, the current moment presents an opportunity to re-examine goals and objectives.

“If your time horizon is at least three years from now…the bottoming process that we expect to occur in the coming months is a summer rebalancing opportunity,” Hyzy said.

Investors with shorter time horizons should also review their goals.

“You have to make sure to review your risk profile and course correct where you need to,” Hyzy said.

A balanced investment process should also include broad diversification across asset classes, in addition to alignment of goals and time horizons, according to Keith Glenfield, head of investment solutions at Merrill and Bank of America Private Bank. .

Opportunistic movements

Increased market volatility has also presented advisors and their clients with the opportunity to take advantage of tax loss harvesting, whereby some securities are sold at a loss to offset capital gains tax on other securities sold. .

The firm provides these services through a suite of tax management services it made available to the firm’s advisors last summer.

Once a client chooses to enroll in the service provided by the company’s fiduciary program, advisors have the discretion and authority to act on their behalf, according to Glenfield.

Advisors to these clients are then able to seek tax loss opportunities as they arise, rather than waiting until the end of the year.

A woman takes a selfie with the “Charging Bull” statue on February 17, 2021 in New York City.

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“If you did this at the end of the year, you don’t know where your specific portfolio or positions will be at that time,” Glenfield said.

“It allows you all year round to help enjoy the peaks and the valleys,” he said.

Other features include tax-efficient rebalancing, quarterly loss collection, and investment strategies that emphasize tax approaches.

The activity level of new offerings is increasing every week, according to Glenfield.

“We are pleased with the customer’s response,” he said.

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