CHIEF INVESTMENT OFFICE

Capital Market Outlook

August 21, 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—The Message in the Bear Steepening: The rise in long-term and real
Robert T. McGee
interest rates around the world over the past month reflects the growing difficulty many Managing Director and Head of CIO Macro Strategy
developed economies are having funding the big deficit policies adopted since the pandemic.
In the U.S., ratings agencies have started to focus on the sustainability of the sharply upward MARKET VIEW 
revised government debt trajectory. The recent big fiscal boost is at odds with monetary
policy trying to cool an overheated labor market. Matthew Diczok
Managing Director and Head of CIO Fixed Income
Market View—Soft Landings and Hard Data: Both the market and BoA Global Research Strategy
are becoming more comfortable with a potential soft landing in 2024. Yet both also
expect short-term rates to peak shortly and the Federal Reserve (Fed) to cut rates in 2024. THOUGHT OF THE WEEK 
Investors should continue to look for opportunities to extend duration past neutral in Fixed
Lauren J. Sanfilippo
Income portfolios, based on attractive real and nominal rates and where we are in the Director and Senior Investment Strategist
current interest rate cycle.
Thought of the Week—There’s a Bear Market in New Neighbors: With the 30-year MARKETS IN REVIEW 
fixed rate mortgage north of 7%, house keys are turning over at the lowest rate in a
decade. Unwilling to give up rock-bottom mortgage rates, households are staying put. Data as of 8/21/2023,
Over 90% of homeowners have mortgages with an interest rate below 6%, 80% of and subject to change
mortgaged homeowners have a rate below 5%, and 23% have rates under 3%. Ultra-low
3% mortgage rates can be considered a phenomenon related to the pandemic and zero-
Portfolio Considerations
interest rate distortions, with a longer-run average between 7% and 8%.
On Our Radar—A potential government shutdown by the end of September is on our We expect some softness in August,
radar and a risk factor we are monitoring closely. The table below provides some brief and which we would use as an opportunity
concise historical data on shutdowns/market effect. for long-term growth investors to
S&P 500 Returns rebalance portfolios. At this point, we
Start of shutdown Duration (days) -3 months +3 months +6 months +12 months believe investors should remain
30-Sept-76 10 0.9% 1.6% -6.4% -8.3%
30-Sep-77 12 -3.6% -1.6% -7.6% 6.2% neutral across Equities and Fixed
31-Oct-77 8 -6.8% -3.2% 5.8% 2.9% Income, as data continues to point to
30-Nov-77 8 -1.6% -8.1% 2.6% -1.1%
30-Sep-78 17 7.3% -6.1% -0.5% 6.6% a mixed atmosphere even in a soft-
30-Sep-79 11 6.3% -1.2% -10.2% 15.6% landing scenario, our base case since
20-Nov-81 2 -5.8% -8.3% -5.6% 12.6%
30-Sep-82 1 9.9% 17.3% 25.9% 39.5% the start of the year. We maintain our
17-Dec-82 3 12.2% 8.8% 23.0% 17.6% preference for Value and high quality
10-Nov-83 3 1.8% -5.5% -2.7% 2.6%
30-Sep-84 2 8.7% -0.2% 8.1% 9.2% overall. Longer-term investors should
3-Oct-84 1 5.7% 1.8% 11.1% 13.3% consider small-capitalization shares,
16-Oct-86 1 1.5% 10.8% 18.7% 24.4%
18-Dec-87 1 -20.9% 8.8% 8.6% 10.9% Emerging Markets and the Energy
5-Oct-90 3 -13.1% 3.0% 20.5% 22.4% and Industrials sectors on their “add
13-Nov-95 5 5.8% 11.7% 11.7% 23.6%
15-Dec-95 21 5.7% 4.1% 8.0% 18.2% to exposures” list as we approach
30-Sep-13 16 4.7% 9.5% 11.3% 17.3% 2024.
19-Jan-18 2 9.8% -4.2% -0.2% -6.3%
21-Dec-18 34 -17.5% 15.8% 21.9% 33.4%
Sources: U.S. House of Representatives; Chief Investment Office. Data as of Juy 2023. Returns in price terms. Past
performance is no guarantee of future results. Please refer to index definitions at the end of this report. It is not
possible to invest directly in an index.

Trust and fiduciary services are provided by Bank of America, N.A., Member FDIC and a wholly owned subsidiary of
Bank of America Corporation (“BofA Corp.”).
Investment products:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
Please see last page for important disclosure information. 5891212 8/2023
MACRO STRATEGY
The Message in the Bear Steepening
Robert T. McGee, Managing Director and Head of CIO Macro Strategy
The rise in long-term interest rates around the developed world over the past month is at Investment Implications
odds with slowing global growth and falling inflation. Prior to the pandemic, long-term
rates usually fell under those conditions. In our view, the sharp rise in real interest rates Fiscal stimulus is forcing interest
reflects the difficulty that the U.S. and other developed economies are having funding the rates higher for longer and
unprecedented peace-time deficits that have followed the pandemic. The recent dragging out the cyclical
downgrade of U.S. government debt by Fitch noted this deteriorating long-term outlook. slowdown. High-quality companies
Partly it reflects the sheer magnitude of the Treasury supply flooding the market as the with strong, stable cash flows are
deficit has doubled from 4% to 8% of gross domestic product (GDP) over the past year. better positioned to weather a
Just as important, the buyers who absorbed most of the debt in the past have pulled back. long slow-growth environment.
Demand is falling while supply is exploding, forcing rates higher. For example, the Fed,
which purchased trillions of dollars in recent years during quantitative easing, has turned
from being the biggest buyer to being a net seller as it runs down its balance sheet with
quantitative tightening.

Other big buyers are pulling back as well. Foreign central banks concerned about the
security of dollar reserves after the confiscation of Russia’s have naturally been
diversifying away from Treasurys. On August 22, officials from the BRIC1 countries are
meeting in South Africa to discuss an alternative to the dollar-based international reserve
system. China has laid the groundwork to play a key role in the new system, which would
reduce the current need for Treasurys. The explosion of post-pandemic deficit spending in
other developed economies has flooded the world with alternatives to Treasurys. Japan’s
relaxation of its yield curve control ceiling has also raised the anchor on global sovereign
rates contributing to the recent rise.

The ongoing excessive fiscal stimulus helps account for the U.S. economy’s better-than-
expected performance in 2023. A year ago, the economy was slowing under the weight of
post-pandemic fiscal drag before picking up in January as a trillion dollars of additional
deficit spending began to filter into the economy during the 12 months through July. The
extra stimulus has forced the Fed to raise rates more than it had planned or the market
expected when the year began. The labor market has remained tight as the rebalancing of
demand and supply is delayed by extra fiscal stimulus. The heated labor market is evident
in wage inflation that has created multiyear union pay raises not seen since the 1970s. In
essence, fiscal policy and monetary policy are pulling in opposite directions, forcing
monetary policy to be tighter than it would otherwise be.

Also working against the usual monetary policy transmission channels is the healthy but
unusual structure of household and company balance sheets that were bolstered by the
massive pandemic spending and its inflationary effect on asset prices. At the same time,
they took advantage of the lowest long-term rates in ages to take fixed rate mortgages
and lock in low long-term corporate borrowing rates. Their liability funding is fixed at low
rates, while they are now benefiting from high money market and Treasury bill rates on
the asset side of their balance sheets. The result is that Investment-grade corporate
interest coverage ratios are near 20-year highs, and many Q2 earnings reports from
companies with high cash holdings cited a big boost to earnings from interest income.

Of course, there is no such thing as a free lunch, and it’s easy to see where the
vulnerability to higher rates resides. As Fitch recently warned, it is evaluating much of the
banking system for downgrades. The March flare-up in some regional banks forced the
Fed to create an emergency lending facility, and the regulators are scrambling to see if
more regulation is needed. Banks’ problems are simple: They have lent long-term fixed
rate money that is funded with short-term liabilities. Their funding costs have risen with

1 Brazil, Russia, India and China.

2 of 8 August 21, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

Fed rate hikes, while rising long-term rates are reducing the value of their legacy fixed rate
loans and securities. They essentially were on the other side of the trade that made
households and corporations relatively impervious to rate hikes.

The fly in the ointment is the potential longer-term problem if rates stay at higher levels.
The exploding deficits make this more likely. Eventually low-rate loans will need to be
refinanced. Research reports on Investment-grade credit finds that the current high-
interest coverage ratio on Investment-grade corporate debt will drop to the lowest level in
more than two decades if rates stay where they are now over the next couple of years.
The rate effect of tighter monetary policy is taking longer to play out in the well-
positioned sectors but is likely to remain a longer-term drag on the economy unless rates
come down.

Those less well positioned subject to floating rate loans are already feeling the effects of
higher rates as delinquencies, defaults and credit denial rates pick up, albeit from the low
levels engendered by pandemic handouts. While these credit problems are only back to
normal levels, the direction of change is clear. Once the unemployment rate starts to rise,
credit problems will become more pervasive. These expectations for deteriorating credit
quality are already embodied in the Fed’s Senior Loan Officer Survey as banks tighten
credit.

Obviously, the market is hoping that the Fed will cut rates before this turns into a
recession. Fed Chairman Powell encouraged this view at his post-Federal Open Market
Committee (FOMC) news conference on July 26, when he stated that the Fed would need
to ease before inflation reached the 2% target. This was a very dovish statement and
suggests that the chairman is positioning to let inflation stay above target. For inflation to
average 2%, it needs to run below to offset the time it’s above target. Implicitly, the
chairman seemed to be sticking with the August 2020 policy change that aimed at letting
inflation run above 2% to offset all the time it was slightly below 2% in the pre-pandemic
era. That seems inappropriate given the massive surge in inflation over the past three
years.

This could mean the bear-steepening is also a response to Powell’s more relaxed attitude
about inflation as well as the snowballing interest cost of the government’s debt. If the
Fed is poised to let the economy run hotter for longer, the current downtrend in inflation
could prove transitory with unemployment still at 50-year lows.

3 of 8 August 21, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

MARKET VIEW
Soft Landings and Hard Data
Matthew Diczok, Managing Director and Head of CIO Fixed Income Strategy
Economic resiliency continues—a “slowdown in the slowdown”—and the market is
optimistic about a “soft landing,” a slowdown in economic activity below trend but positive Investment Implications
and above recessionary levels. In fact, BofA Global Research officially amended its Relative to your goals, investment
economic forecast in early August, no longer seeing a 2024 recession and instead time horizon and risk tolerance,
predicting a soft landing as its base case. investors should currently be
Research has referenced real economic growth of over 2%, continued labor market slightly long duration to take
strength as evidenced by unemployment near all-time lows, and abating wage and price advantage of and “lock in”
pressures. Cyclical sectors including housing are stabilizing, and thus growth slowing but attractive longer-term rates and
remaining positive throughout their time horizon is the new forecast. This change was minimize reinvestment risk. To the
correctly foreshadowed by risk assets, with the S&P +28% from its 2022 low, and credit extent rates move substantially
spreads continuing to grind tighter. higher, that may leave the ability
In line with this outlook, they have amended its rate forecasts. The 2023 year-end 10-year to extend duration even further in
Treasury forecast was raised to 4% from 3.5%, acknowledging the trading range likely the future.
shifting higher to 3.75% to 4.25%. This proved apt, as the 10-year Treasury has risen to
4.25%. They expect one more Fed rate hike (25 basis point (bps), November), bringing the
targeted fed funds range to 5.5% to 5.75%. It then expects the Fed to pause and keep
short-term rates “higher for longer.” They also expect rate cuts starting in Q2 2024,
shaving 75 bps by year-end 2024. This forecast is similar to market projections, which also
predict cuts next year but expect one more rate cut (100 bps total) over 2024.
This forecast is entirely consistent with the Chief Investment Office’s asset allocation
guidance. We suggest investors to be neutral across Equities and Fixed Income, fully
invested and not overweight cash, and maintain a slightly long-duration position in Fixed
Income, balancing attractive yields against some risk of higher (and even more attractive)
yields near term. Our duration recommendation is predicated on several opinions. First,
nominal yields are attractive historically. Two, real yields are very attractive long term, and
correlated with positive short-term returns. Third, we are close to the end of the rate hike
cycle, and—from our viewpoint—that is when reinvestment risk (lower rates) should
become a more pressing concern for investors than interest rate risk (higher rates). We
would like for investors to not be overly exposed to short-term rates at these better long-
term valuations at this part of the interest rate cycle.
First, nominal rates look attractive. Five-year Treasurys are 4.41%, just shy of the highest
levels in October 2022. Except for a brief one-and-a-half-years before the Global Financial
Crisis in 2006-2007, nominal rates have not been higher than this level consistently in
over 20 years (prior to 2001).2 Moreover, pre-2000, real GDP averaged around 4%. That is
significantly above the Fed’s forecast for current trend economic growth of 1.7% to 2%.3
If the Fed is correct, yields should not mean-revert to levels existing in prior episodes of
higher real growth. Nominal yields across high-quality Fixed Income—the Bloomberg
aggregate yield is >5%—all show similar, attractive valuations. After years of low rates,
this is great news for those living on fixed incomes.
Second, “real” yields—yields adjusted for inflation expectations—look even more
attractive, in our opinion. Five-year real yields recently hit 2.2% and are very close to that
level currently. Based on daily readings over the last 20 years, real yields have only been
higher than this around 7% of the time. Five-year real yields averaged negative -0.14%
over the last five years, negative -0.09% over the last 10, and only 0.29% over the last 20.
From the depths of 2021, when real yields were negative 2%, real yields have increased
+420 bps in investors’ favor.4 This is the largest increase in the history of the data series.
The positive effect on savers after years of financial repression—the Fed actively keeping
rates below inflation to discourage saving—cannot be overstated. At -2% real
2
Bloomberg. As of August 16, 2023.
3
Bloomberg, Federal Reserve Summary of Economic Projections (June 2023). As of August 16, 2023.
4
U.S. Treasury Inflation-Indexed Yields per Bloomberg, Chief Investment Office. As of August 16, 2023.

4 of 8 August 21, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

yields, savers “lock in” a long-term reduction in real wealth for the privilege of holding U.S.
Treasurys. At positive real yields, it is the opposite—with no credit risk in a government-
guaranteed security, investors can now compound real wealth on any time frame out to
30 years. This is an incredibly favorable development, in marked contrast to the last 15
years, and strongly suggests lengthening duration to a slightly long position to take
advantage of these higher real yields. In fact, real yields may often signify when nominal
yields are potentially “cheap,” in our opinion. Five-year real yields are 70% correlated with
forward 18-month nominal total returns of the Bloomberg Aggregate Bond Index.
Exhibit 1: Real Yields Are Attractive On A Long-Term Basis And Correlated With
Positive Near-Term Returns.
Real yield (5 Year, Left Scale)
4% 20%
Forward total return on Bloomberg Agg (18 month, Right Scale)
3% 70% correlation a monthly 15%
basis since 2021
2% 10%

1% 5%

0% 0%

-1% -5%

-2% -10%
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Sources: Bloomberg; Bloomberg Aggregate Bond Total Return Index; Chief Investment Office calculations. Data as of August 16,
2023. Past performance is no guarantee of future results. Please refer to index definitions at the end of this report. It is
not possible to invest directly in an index.

Finally, based on the vast majority of market participants’ views—consensus economists,

interest rate futures, the Fed itself—the Fed is either at or near the end of this rate hike
cycle. Our prior work highlights that once the Fed transitions from rate hikes to cuts, short
rates are around 10x more volatile than long rates, move down more quickly than long rates,
and long rates stop rising and eventually move lower as the Fed cuts short rates.5 On top of
the overwhelmingly positively valuation picture, this is another indication that the time to
extend duration and “lock in” longer rates may be close to when the Fed is finally done
hiking.
The slightly long-duration position, combined with an explicit acknowledgement that rate risk
is always two-sided and may present an even more compelling opportunity in the future, is
the most prudent course of action for achieving decent longer-term returns, in our opinion.

5 Capital Market Outlook: “Interest Rate Cycles, Past and Present,” June 20, 2023.

5 of 8 August 21, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

THOUGHT OF THE WEEK
There’s a Bear Market in New Neighbors
Lauren J. Sanfilippo, Director and Senior Investment Strategist
Only 1% of homes in the U.S. have changed hands so far this year, the lowest turnover Investment Implications
rate in a decade, according to Redfin. What’s for sale, or the supply of listings, is about half
U.S. households were able to “lock
of what it was four years ago.6 This cling-to-home mentality is prevalent across the U.S.
in” longer-term, fixed-rate
and reflects the fact that many U.S. households are sitting on mortgage rates well below
mortgages at generational lows,
current levels. Indeed, with 30-year mortgage rates north of 7%, many homeowners
which has been additive to
wouldn’t dare move now and give up rock-bottom rates.
household/consumer resiliency.
Structurally that’s problematic, considering that over 90% of homeowners with mortgages Heading into the fall, overall risk is
have an interest rate below 6%. More than 80% of mortgaged homeowners have a rate below still elevated given higher interest
5%, and 23% have rates under 3%. All are well under the 30-year fixed-rate mortgage national rates and corporate earnings that
average, which is currently hovering near the highest level in over 20 years at 7.05% (Exhibit 2). are resetting, amid the third
Ultra-low 3% mortgage rates can be considered a phenomenon related to the pandemic and straight quarter of corporate
zero-interest rate distortions, with longer-run average rates between 7% and 8%. profits contraction.
Exhibit 2: Staying Put: Home Is Where the Low Mortgage Rates Are.
2A) Share of Mortgage Loans Outstanding by Mortgage Rate 2B) 30-Year Fixed Rate Mortgage Average in the U.S.
Less than 3% 3 - 4% 4 - 5% 5 - 6% Greater than 6% 20
100
18
16
75
14
12
50
10
8
25
6
4
0
2
2013Q1

2014Q1

2015Q1

2016Q1

2017Q1

2018Q1

2019Q1

2020Q1

2021Q1

2022Q1

2023Q1

1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
2023
Exhibit 2A) Sources: Federal Housing Finance Agency; National Mortgage Database. Data as of July 2023. Exhibit 2B) Dotted line indicates the average over displayed time period. Source: Freddie
Mac. Data as of August 17, 2023.

Not helping matters for household formation, the inventory of available single-family
homes for sale is roughly 1 million—the lowest level since the late 1990s, according to
the National Association of Realtors. Home prices are rising, piling on more trouble for
first-time home buyers, who confront rising financing costs. The one-two punch has
hammered the housing affordability index in the U.S. to a record low dating back to 1997,
according to Goldman Sachs.
The better news for some and reflecting the rising value of U.S. homeowner stock is that
households are sitting on near-record levels of home equity. Tappable home equity—the
amount that can be accessed while still leaving a 20% equity cushion—climbed to
$10.5 trillion in June, just shy of its 2022 peaks.7 The average mortgage holder now has
$199,000 in equity, up from $185,000 in Q1. It’s potential? Home equity line of credit
(HELOC) mortgages could be future fuel/support for U.S. households into 2024—whether
for home renovations, debt consolidation purposes, or for cash management. Yes, household
savings are dwindling, student loans are coming due, and credit card APRs (annual
percentage rates) have climbed over the past year. But into the fall, various supports for the
consumer include resilient employment figures, household debt as a percentage of GDP at
the lowest levels since 2001, and near-record levels of home equity. Being “locked in” at
home adds to the backdrop.
6
National Association of Realtors. Data as of June 30, 2023.
7
Tappable equity is considered equity that could be withdrawn while still maintaining an 80% or lower loan-to-value
ratio. Source: Black Knight. Data through June 30, 2023.

6 of 8 August 21, 2023 – Capital Market Outlook RETURN TO FIRST PAGE

MARKETS IN REVIEW

Equities
Total Return in USD (%) Economic Forecasts (as of 8/18/2023)
Current WTD MTD YTD 2022A Q1 2023A Q2 2023A Q3 2023E Q4 2023E 2023E
DJIA 34,500.66 -2.1 -2.8 5.5 Real global GDP (% y/y annualized) 3.6 - - - - 3.0
NASDAQ 13,290.78 -2.6 -7.3 27.7 Real U.S. GDP (% q/q annualized) 2.1 2.0 2.4 2.0 1.5 2.1
S&P 500 4,369.71 -2.1 -4.7 15.0 CPI inflation (% y/y) 8.0 5.8 4.0 3.4 3.3 4.1
S&P 400 Mid Cap 2,578.86 -3.0 -5.4 7.2 Core CPI inflation (% y/y) 6.1 5.6 5.2 4.3 3.8 4.7
Russell 2000 1,859.42 -3.4 -7.1 6.6 Unemployment rate (%) 3.6 3.5 3.5 3.7 3.8 3.6
MSCI World 2,897.50 -2.5 -5.3 12.6 Fed funds rate, end period (%) 4.38 4.88 5.13 5.38 5.63 5.63
MSCI EAFE 2,057.64 -3.3 -6.3 8.1
MSCI Emerging Markets 964.44 -3.3 -7.7 2.8 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 5.07 -0.52 -1.79 0.29 Sources: BofA Global Research; GWIM ISC as of August 18, 2023.
Agencies 5.05 -0.08 -0.30 1.51
Municipals 3.76 -0.58 -1.41 1.62
U.S. Investment Grade Credit 5.12 -0.50 -1.85 0.13 Asset Class Weightings (as of 8/8/2023) CIO Equity Sector Views
International 5.80 -0.71 -2.38 1.10 CIO View CIO View
High Yield 8.70 -0.82 -1.07 5.69 Asset Class Underweight Neutral Overweight Sector Underweight Neutral Overweight
90 Day Yield 5.43 5.42 5.40 4.34
neutral yellow

Equities
Overweight green

    Healthcare    
2 Year Yield 4.94 4.89 4.88 4.43
Slight overweight green

U.S. Large Cap

Slight overweight green

    Energy    
10 Year Yield 4.25 4.15 3.96 3.87 U.S. Mid Cap
Slight overweight green

   
Slight overweight green

30 Year Yield 4.38 4.26 4.01 3.96 neutral yellow

Utilities    
U.S. Small-cap    
Slight underweight orange Consumer Neutral yellow

   
International Developed     Staples
Commodities & Currencies Emerging Markets
Neutral yellow

    Information Neutral yellow

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

Technology
Fixed Income    
Commodities Current WTD MTD YTD
U.S. Investment- slight overweight green
Communication Neutral yellow

   
Bloomberg Commodity 234.61 -1.2 -2.6 -4.6    
grade Taxable Services
WTI Crude $/Barrel†† 81.25 -2.3 -0.7 1.2 International
neutral yellow

    Industrials
Neutral yellow

   
Gold Spot $/Ounce†† 1,889.31 -1.3 -3.9 3.6 Slight underweight orange

Global High Yield Taxable

Neutral yellow

    Financials    
Total Return in USD (%) U.S. Investment Grade
slight underweight orange
Slight underweight orange

    Materials    
Prior Prior 2022 Tax Exempt slight underweight orange

U.S. High Yield Tax Exempt

Slight underweight orange

Real Estate    
Currencies Current Week End Month End Year End    

EUR/USD 1.09 1.09 1.10 1.07 Alternative Investments* Consumer Underweight red

   
Discretionary
USD/JPY 145.39 144.96 142.29 131.12 Hedge Funds
USD/CNH 7.31 7.26 7.15 6.92 Private Equity
Real Estate
S&P Sector Returns Tangible Assets /
Commodities
Information Technology -0.8% Cash
Energy -1.2%
*Many products that pursue Alternative Investment strategies, specifically Private Equity and Hedge Funds, are available
Healthcare -1.5% only to qualified investors. CIO asset class views are relative to the CIO Strategic Asset Allocation (SAA) of a multi-asset
Utilities -1.7% portfolio. Source: Chief Investment Office as of August 8, 2023. All sector and asset allocation recommendations must be
Materials -2.3% considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all
Consumer Staples -2.4% recommendations will be in the best interest of all investors.
Industrials -2.4%
Communication Services -2.7%
Financials -2.8%
Real Estate -3.2%
Consumer Discretionary -4.1%
-5% -4% -3% -2% -1% 0%

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

08/14/2023 to 08/18/2023. †Bloomberg Barclays Indices. ††Spot
price returns. All data as of the 08/18/2023 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 August 21, 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 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.
Bloomberg Aggregate Bond Index Total Return is a broad-based fixed-income index used by bond traders and the managers of mutual funds and exchange-traded funds (ETFs) as a benchmark
to measure their relative performance.
Housing affordability index measures the degree to which a typical family can afford the monthly mortgage payments on a typical home.

Important Disclosures
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
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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
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The Chief Investment Office (“CIO”) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions
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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
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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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