Savita Subramanian, Bank of America Securities head of U.S. equity and quantitative strategy, is warning about parallels between markets now and in Feb 2020.
- Energy is outperforming and has positive momentum and upward earnings revisions
- Tech and communications are hot but with expensive valuations
- Consumer staples rank dead last in returns
The last one is particularly notable because she says that a setup like this historically has led to big outperformance in staples, including by 73% during the 2000-2002 tech bust.
On CNBC last week she said "I like stocks, I just don't like the index" and today she reiterated a year-end target of 7100 despite the index trading at 7383 now.
The S&P 500, she says, is the most-crowded ticker in the world. The prior worry is that new issuance is a red flag and a secondary one is that the capex surge is eating into free cash flow — which has gutted the buybacks that did so much of the index's heavy lifting previously.
So she's selective: long financials, energy, materials and staples; steering clear of discretionary and utilities.
Her target is -6% from here.
h/t @MikeZaccardi
