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Breaking insights on the economy, market volatility, policy changes and geopolitical events
March 18, 2026
Understanding the latest Federal Reserve rate pause
Amid mixed signals on jobs and inflation, the Federal Reserve (the Fed), as widely expected, held steady on interest rates at its March 18 meeting. The decision, which leaves the federal funds rate at between 3.50% to 3.75%, marks the second pause in 2026, following three consecutive rate cuts to close out 2025.Footnote 1
Why the pause?
The economy's surprising loss of 92,000 jobs in FebruaryFootnote 2 might have argued for an additional rate cut to stimulate hiring. But surging oil prices since the Middle East conflict started on Feb. 28 have raised concerns that stubborn inflation could reignite — the Fed typically fights inflation by raising rates to cool the economy. "The Fed is walking a fine line between its goals of maximum employment and moderate inflation," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
What's next for the economy and rates?
"While some observers have warned of 1970s-style stagflation, when prices rise while the economy sputters, that's not our base case," Hyzy says. "U.S. energy production has made the economy more resilient against oil shocks. And the economy, despite some concerns, remains fundamentally strong." In addition, Hyzy says, "We expect the current rate-cutting cycle to resume later this year, but the pause will likely continue until the Fed has greater clarity on where the Middle East conflict, and inflation, are headed."
How can investors respond?
Investors might take a page from the Fed's playbook by remaining patient and avoiding hasty responses to geopolitically driven volatility, Hyzy advises. "Stay diversified across asset classes and invest with long-term goals in mind," he adds. "Periodically rebalance and look at temporary declines as potential opportunities to add to your portfolio."
Footnote 1 The New York Times, "Federal Reserve Leaves Interest Rates Unchanged," March 18, 2026.
Footnote 2 U.S. Bureau of Labor Statistics, "Employee Situation Summary," March 6, 2026
March 10, 2026
Navigating a new world of uncertainties in 2026
A war-related spike in oil prices drove sharp volatility in stocks as markets opened for the week of March 9.Footnote 1 Oil briefly topped $100 barrel — 40% higher than before the U.S. and Israel launched missile attacks on Iran on Feb. 28Footnote 2 — raising fears over broader economic impacts if the war widens and drags on. And the Middle East is just one of many concerns in a year of uncertainties. "Investors should expect elevated volatility in the months ahead," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "At the same time, it's important to stay focused on the underlying forces driving long-term growth."
Seeking signs of stability
In addition to oil prices and stock volatility, the Chief Investment Office will be watching several key market factors in the coming weeks for signs that conditions are stabilizing, Hyzy says. For example, credit spreads (the difference in yield between corporate bonds and U.S. Treasurys of similar duration) have been widening — often a sign of investor concern about the economy. "We're also closely following inflation, the strength of the U.S. dollar, and bond yields and rates, all of which should help dictate what's ahead for asset prices in the short and medium term."
Tracking other uncertainties
Even without the Middle East conflict, other pressures have the potential to jolt investors and markets in 2026. One example: "Midterm elections, coming in November, typically bring higher-than-normal volatility," Hyzy says. Among the other possible contributors to volatility: the impact of artificial intelligence on the software industry, stresses in the private credit market, the partial government shutdown and its potential impact on the travel industry, the impact of tariffs, and more.
Keeping a long-term focus
While an extended war and persistently high oil prices present risks for the global economy,
historically geopolitical events of this nature have had limited long-term impact, Hyzy notes. And the U.S., as a leading energy producer and net exporter of oil, may be less vulnerable than other regions to oil shocks, he adds. As for the other uncertainties, the volatility they may create, while unsettling, will likely be temporary, Hyzy believes. For example, "despite the volatility midterm elections cause, markets historically have hit new highs a year later," he adds.
"Given all the uncertainties, there's no clear timetable for market stabilization," Hyzy says. "We continue to emphasize patience, a balanced, diversified approach, and having a detailed plan to buy or rebalance on weakness." He advises long-term investors to avoid trying to "time" markets and instead stay focused on broader trends such as corporate earnings growth, rising capital investment, productivity, accelerated innovation and global economic growth.
Footnote 1 NBC News, "Oil hits $100 per barrel for first time since July 2022," March 8, 2026.
Footnote 2 Reuters, "Iran war boosts oil price, but oil major shares are stuck on the sidelines," March 9, 2026.
March 2, 2026
Conflict in the Middle East: What to expect
The United States and Israel on February 28 launched a military campaign against Iran, with retaliatory strikes hitting Israel and other countries in the Middle East over the weekend.Footnote 1 "As markets open March 2, investors are preparing for potentially significant volatility," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
Short-term outlook (three months)
"While U.S. economic uncertainties and market volatility will likely rise, fiscal and monetary support should keep the U.S. economy clear of recession and corporate profit growth intact," Hyzy believes. Expect higher gold and energy prices, especially if tanker passageways shut down. The energy and defense industries could rally, with consumer staples and healthcare outperforming. Cyclical stocks such as luxury goods and airlines may underperform, and technology could continue to struggle. And look for the U.S. dollar to strengthen and U.S. Treasurys to outperform credit markets, Hyzy believes.
Medium-term outlook (six to 18 months)
"Equity volatility should eventually fall towards normal levels," Hyzy believes. "Look for high-quality, dividend-paying stocks, utilities and industrials to lead, while technology and financial shares stabilize." The dollar should weaken slightly and credit markets stabilize and start to outperform Treasurys. "While uncertainties over upcoming mid-term elections could prompt investors to add non-U.S. exposure, we believe global and U.S. economic growth could surprise to the upside."
Longer-term outlook
"While the current uncertainties are deeply concerning in many ways, we do not expect a material effect on the global economy or corporate profits overall," Hyzy says. Historically, of 14 major geopolitical events since 1962, the S&P 500 index was up an average of 9.5% one year later,Footnote 2 he notes. "Our themes for long-term growth continue to be areas such as aerospace and defense modernization, robotics and automation, the biotechnology renaissance, new infrastructure, agentic AI applications and more."
What you can do
"In the very short term, investors should allow expected market volatility to subside somewhat before rebalancing portfolios," Hyzy suggests. "But have plans ready to take advantage of market weakness when tensions ease." Any potential adjustments should be guided by a long-term investment strategy based on your personal goals rather than trying to anticipate events, he says. "Timing markets is too difficult in normal conditions, let alone during periods of excessive geopolitical risk."
Footnote 1 The New York Times, "Live updates: Iran retaliates against Israel and U.S. allies," March 1, 2026.
Footnote 2 Bloomberg. Data as of Jan. 26, 2026.
February 25, 2026
Is recent tech volatility AI's 'do or die' moment?
After years of market dominance, fueled by the rapid expansion of AI, technology stocks in 2026 have been notable mainly for their volatility. Software companies dropped more than $400 billion in value earlier this month,Footnote 1 and companies ranging from semiconductors to AI infrastructure have been battered.Footnote 2 "While it may feel like a major retreat from technology, we see this as part of a natural rotation towards greater balance between technology and other sectors," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank.
A rotation months in the making
Despite the recent headlines, the tech rotation actually started in 2025, when five of the "Magnificent Seven" tech giants underperformed the S&P 500 index.Footnote 3 "One explanation may involve investor fatigue after years of paying premium valuations for those companies," says Kirsten Cabacungan, CIO investment strategist and author of the report.
More fundamentally, notes Hyzy, "Investors who leapt to embrace AI are now asking hard questions: Where are the bottlenecks? Will there be enough energy to power the data centers? Who will the winners and losers be?" The early February software selloff, for example, was prompted by concerns that emerging AI tools could replace some core services currently provided by software companies. "This rethinking process happens with every major innovation," Hyzy says. "While tech companies may no longer benefit indiscriminately from investor enthusiasm, the transformative power of these new technologies is undimmed."
Broadening markets, underlying strengths
As markets take a breather on big tech, one offshoot has been a healthy broadening of markets. "A growing number of stocks in sectors such as materials, healthcare, industrials and consumer staples have reclaimed long-term uptrends," Cabacungan says. "This expanding participation suggests the bull market has developed a stronger and more durable foundation." As evidence, markets shrugged off tech sector woes and surged to new highs in early February.Footnote 4 Hyzy adds, "We believe the U.S. economy will surpass 5% nominal GDP growth in 2026."
Focus on diversification
"Investors should expect additional periodic tech volatility as the sector evolves," says Hyzy. These uncertainties underscore the importance of investing in a range of companies and technologies. Investing across industries could help you potentially benefit from broadening market performance, and with mega-cap companies struggling, you might consider the growth potential of mid- and
small-cap stocks. "Above all, be patient and stick to an investment strategy built for your long-term goals."
Footnote 1 Axios, "AI wiped out $400 billion this week – and it's only getting started," Feb. 7, 2026.
Footnote 2 The Wall Street Journal, "Intensifying tech slide sends Nasdaq to worst two-day drop since April," Feb. 4, 2026.
Footnote 3 Los Angeles Times, "Top tech titans' dominance wanes in 2025," Jan. 12, 2026.
Footnote 4 CNN, "Stocks hit historic milestone as Dow crosses 50,000 points for the first time ever," Feb. 6, 2026.
February 20, 2026
The Supreme Court rejects tariffs. What now?
The U.S. Supreme Court on February 20 struck down many of the global tariffs imposed by the White House starting in 2025.Footnote 1 While a clear setback for the administration's broad use of tariffs as a tool in trade disputes and geopolitical relations, the decision leaves many unknowns to be worked out in the weeks ahead.
What we know
In a 6-3 decision, the court specifically rejected the administration's claims of authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA), saying that would amount to "a transformative expansion" of presidential authority. The majority opinion noted that "in IEEPA's half century of existence, no President has invoked the statute to impose any tariffs, let alone tariffs of this magnitude and scope."Footnote 2
Still to be worked out
The economic implications of the decision are not immediately clear. Left uncertain, for example, is the issue of any refunds that may be due on the billions of dollars in tariffs already collected.Footnote 3 The ruling does not invalidate all the tariffs, only those imposed under the IEEPA, and the administration may explore other means to impose tariffs.Footnote 4
Market reaction
At least initially, markets responded favorably to the news, with the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite posting early gains.Footnote 5 "Consumer stocks in particular may benefit, especially those with supply chains in Asia," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. While it's too early to know the long-term market impact, "the news does not alter our bull market thesis and overweight on equities." Investors should stay focused on the broader themes of strong corporate fundamentals and accelerating global economic growth, he adds.
Footnote 1 The Wall Street Journal, "Supreme Court strikes down Trump's tariffs," Feb. 20, 2026.
Footnote 2 Supreme Court of the United States, "Opinions of the Court – 2025," Feb. 20, 2026.
Footnote 3 The Wall Street Journal, "Supreme Court strikes down Trump's tariffs," Feb. 20, 2026.
Footnote 4 NBC News, "Supreme Court strikes down most of Trump's tariffs in a major blow to the president," Feb. 20, 2026.
Footnote 5 CNBC, "S&P 500 jumps after Supreme Court knocks down Trump's emergency tariffs: Live updates," Feb. 20, 2026.
February 17, 2026
What to expect from the latest government shutdown
The U.S. Government entered a partial shutdown at midnight on Friday, February 13, affecting continued funding for the Department of Homeland Security (DHS). The stumbling block: the inability of lawmakers to reach a consensus on potential reforms to Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP), which DHS runs.
This is the third such event in recent months. A four-day partial shutdown affecting numerous agencies ended Feb. 3,Footnote 1 and a sweeping, 43-day shutdown, the longest on record, ended last November.Footnote 2
How we got here
While the Feb. 3 agreement assured funding for most federal government operations, it funded DHS only through Feb. 13, giving Congress and the administration just days to resolve sharp differences in the wake of high-profile ICE confrontations in U.S. cities.Footnote 3 When those talks broke down, the latest shutdown was unavoidable.
What operations will be affected?
While ICE and CBP are at the center of the shutdown dispute, reports suggest they could be unaffected thanks to funding provided under the 2025 One Big Beautiful Bill Act.4 Other key DHS functions include the Federal Emergency Management Agency (FEMA), the Transportation Security Administration (TSA), the United States Coast Guard, and more.Footnote 5 While essential functions continue during government shutdowns, some workers may be furloughed while others work with no paychecks until the shutdown ends. Travelers could experience travel delays and other disruptions.Footnote 6
How will markets respond?
"Despite the seriousness of the underlying issues and the potential for inconveniences, the shutdown will likely have little lasting impact on markets and investors," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. "History suggests that markets recover quickly from any volatility related to even extended shutdowns, so we emphasize sticking to your long-term investment strategy."
Tune in regularly to the CIO's
Market Update audiocast for ongoing insights, and check back here for further updates on the shutdown and other market conditions.
Footnote 1 The New York Times, "Trump signs bill to reopen government," Feb. 3, 2026.
Footnote 2 PBS News, "Trump signs government funding bill, ending record 43-day shutdown," Nov. 13, 2026.
Footnote 3 The New York Times, "Trump signs bill to reopen government," Feb. 3, 2026.
Footnote 4 Cato Institute, "The One Big Beautiful Bill made ICE shutdown-proof and eroded fiscal norms," Feb. 10, 2026;
The Hill, "DHS faces weekend shutdown with ICE talks inching forward," Feb. 11, 2026.
Footnote 5 DHS, "Operational and support components," Jan. 28, 2026.
Footnote 6 CBS News, "Democrats reject latest White House offer on ICE reforms with Homeland Security hanging in the balance," Feb. 10, 2026.
January 28, 2026
The Federal Reserve holds steady on rates
As widely expected, The Federal Reserve (the Fed) made no move to lower the federal funds rate at its January 28 meeting. "We're in the middle of a rate-cutting cycle, which tends to be positive for economic growth and equities," says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Yet after three cuts in 2025, most recently in December, the Fed will carefully analyze a range of economic data before determining when to resume cutting in the coming months, Hyzy believes.
Balancing inflation and labor market concerns The Fed adjusts interest rates to balance its two primary objectives, full employment and controlled inflation. Lower rates stimulate the economy and hiring; higher rates tend to slow the economy, tamping down rising prices.
"We believe the economy is gathering momentum, with inflation still above the Fed's 2% target,"Footnote 1 says Hyzy. At the same time, he believes, "a softening labor market is clearly a concern," with the U.S. economy adding a lower-than-expected 50,000 jobs in December."Footnote 2 "This month's decision does not prevent the Fed from deciding to drop rates later in the year if that trend continues," Hyzy adds. And come May, a new Fed chair will enter the equation. "We currently expect two additional cuts in 2026."
Footnote 1 PBS, "Inflation cooled slightly in December but remains above Fed's target," Jan. 13, 2026.
Footnote 2 CNBC, "U.S. payrolls rose 50,000 in December, less than expected; unemployment rate falls to 4.4%," Jan. 9, 2026.
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