‘It’s going to be a year where we are shocked by the volatility,’ BofA’s Savita Subramanian warns

Traders ought to proceed with warning, in accordance with BofA Securities’ Savita Subramanian.

Regardless that February kicked off on a powerful notice, she warned on CNBC’s “Quick Cash” a messy sideways market is forward.

“It’s going to be a 12 months the place we’re shocked by the volatility,” the agency’s U.S. head of fairness and quantitative analysis mentioned Tuesday. “This can be a 12 months the place we recalibrate expectations to an surroundings the place money yields are more likely to transfer from zero — nugatory right this moment — to one thing nearer to 2% by the tip of the 12 months.”

Within the meantime, it seems Wall Avenue is in shopping for mode. The Dow, S&P 500 and Nasdaq are on a three-day win streak after a tough January. “

“I simply don’t suppose it’s time to purchase the S&P 500 wholesale,” mentioned Subramanian. “I don’t suppose that is going to be a 12 months the place the S&P turns in nice returns.”

Primarily based on the CNBC market strategist survey, Subramanian has the second lowest S&P 500 worth goal on the Avenue. Her goal is 4,600, which suggests a 1% loss from Tuesday’s shut and a few 5% drop from the index’s all-time excessive.

“Between right this moment and 12 months finish, we’re going to hit that focus on a number of instances, and we’re going to see some massive swing from the market,” she mentioned.

And, Subramanian believes the Fed received’t come to the rescue.

“We have to get used to the concept that asset inflation could also be behind us, and we’re now heading for actual inflation,” she famous.

BofA’s financial workforce predicts the Federal Reserve will hike charges seven instances this 12 months. Subramanian anticipates the strikes will create acute ache for in style areas of the market.

“I don’t suppose the market is pricing that in,” mentioned Subramanian. “What will get damage are a few of these longer period development shares in an surroundings the place low cost charges are rising. And, that’s the place I feel the S&P is likely to be in hassle as a result of that’s a much bigger weight within the benchmark.”

Subramanian’s recommendation to traders: Keep away from Huge Cap Tech and development names which thrived through the period of free capital and no earnings. As a substitute, look for top of the range shares buying and selling at decrease costs.

“The excellent news is that companies and customers are holding much more money than they have been again in 2008 [and] 2009,” mentioned Subramanian. “This might really be a greater surroundings for a number of the cash-rich corporates.”

Subramanian lists vitality for instance. It was Tuesday’s finest performing S&P 500 group.

“It nonetheless affords a lot greater free money movement than say TIPS or different proxies for inflation safety.” she mentioned. “It’s nonetheless probably the most underweighted sectors by lengthy solely managers.”

She additionally likes small caps and worth teams together with financials and well being care.

“My mantra for the 12 months is simply to make use of volatility as a shopping for alternative for top of the range, free money movement yielders,” Subramanian mentioned.

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