Personal Finance

What Merrill is telling clients now amid market uncertainty

Key Points
  • Even though uncertainty has gripped the markets and economy, the U.S. is not currently on the brink of a recession, executives at Merrill said on Tuesday.
  • One of the biggest lessons from the 2008 financial crisis still holds true: Sticking to your long-term goals, and having an investment strategy to match, will get you where you want to be.
  • Here is what the firm is telling clients now, and what you should be expecting to hear from your advisor.
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This week's markets may be giving some investors flashbacks to 2008, when stocks hit a turbulent stretch and the financial crisis began.

However, fearful investors should take heart: The factors at play in this market are very different than they were then, executives from Merrill Lynch Wealth Management and Bank of America said in an interview on Tuesday.

What's more, recent events don't necessarily mean the U.S. is heading for an economic downturn.

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"As of right now, we are not in the camp that the U.S. develops a recession through this," said Chris Hyzy, chief investment officer at Merrill and Bank of America Private Bank.

For individual investors, it's more important than ever to stick to your personal goals and the corresponding financial strategies to help meet them.

"In the case of fast-moving markets, it's trying to help ensure that we maintain perspective when emotions can be running high and remind clients of the work that's happened," said Andy Sieg, president of Merrill Lynch Wealth Management.

The outlook is not bleak

Despite the sharp dips in stocks (despite Tuesday's rally), there's no sense of panic among Merrill Lynch's wealth clients, Sieg said.

One reason for that is that clients are already focusing on how the economic and market environment is going to look on the other side of the activity we're seeing today, he said.

"You can see the potential for an environment of low rates, low energy prices, equity markets that have corrected to attractive levels, and the foundation is laid for the next leg of the bull market," Sieg said.

401(k) trading activity surges amid coronavirus fears
401(k) trading activity surges amid coronavirus fears

One likely scenario is a coordinated global response on monetary policy that would include not just interest rates, but also fiscal stimulus. If that occurs, Hyzy said, that could lead to a so-called U-shaped recovery.

"A U-shape would be a gradual recovery in the market that lends itself to better profits as we head into 2021," Hyzy said.

Stick to your core goals

Whether clients are on the brink of retirement or 30 years from it, many of the conversations they are having with their financial advisors are now the same, according to Sieg.

"Regardless of where they are in their life journey, the question is very similar, which is, 'Are my family and I going to be OK?'" Sieg said.

In those conversations, Merrill's financial advisors are pointing clients back to the planning and portfolio building that happened prior to the market rout.

In most cases, clients already have a long-term plan, which means their goals and priorities are funded, there's liquidity available and their portfolios are diversified, Sieg said.

A well-diversified portfolio, from a positioning perspective, is performing well during this environment.
Chris Hyzy
chief investment officer, Merrill Lynch Wealth Management and Bank of America

"When that work has happened, it pays enormous dividends in days like yesterday," Sieg said, referring to the earlier 2,000-point plus drop in the Dow.

One of the ways that investors can weather market downturns well is by being well positioned, according to Hyzy.

"A well-diversified portfolio, from a positioning perspective, is performing well during this environment," Hyzy said.

It's important to have a fixed income allocation to help mitigate risk during times like these when equities come down from their highs, he said.

Remember this is not 2008

While comparisons to the last downturn still occur, many things have changed since 2008.

For one, investors are more sophisticated than they were then.

"Clients have more access to information than ever before," Sieg said. "They took lessons away from '08, and in many cases those lessons have been implemented over the last 10 years."

That includes the importance of planning and diversification.

To that end, Merrill's advisors are reminding their clients — whether it's a 70-year old with a bond ladder allocation for income or a 40-year-old who is still years from retirement — why they are invested the way they are now, Sieg said.

"Clients across the marketplace should be fully expecting to hear from advisors proactively in this environment," he said.