Why Savita Subramanian Thinks Stocks Can Keep Going Higher

Savita Subramanian (0:02)

Bloomberg Audio Studios.

Tracy Alloway (0:04)

Podcasts, radio, news.

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

Joe, for all intents and purposes, we're pretty much a record in terms of US stocks.

Joe Weisenthal (0:30)

Totally.

We're recording this April 2nd, so we're actually down a little bit today, about a percent. But the story in my mind of the market for 2024 is that we went into this year with all sorts of soft landing optimism, the Fed is gonna cut rates a bunch of times, and then all these sort of rate cut hopes are sort of slowly evaporating, but it's hardly affected the stock market. And so we're basically at record highs, despite the fact that that first cut keeps getting pushed out into the future.

Tracy Alloway (0:56)

Yeah, and the question is, are stocks going to start to turn lower? So again, they are lower today, they've been kind of vacillating for the past couple of days. Is this the start of a durable drop, or are markets basically catching their breath after a torrid rally, and are they going to continue upward? Is all that excitement over things like AI and tech just going to keep going? And speaking of excitement over AI and tech, you do see some commentary at the moment about bubble territory. So the idea that, well, maybe we're getting a little bit too optimistic, or isn't it weird that it was expectations of rate cuts that drove the move upward, but as the rate cuts get priced further out, we're not really seeing that big impact on stocks.

Joe Weisenthal (1:38)

Totally. So for a while, as the market was doing this sort of straight line up, really since the end of October, when rates peaked, part of this sort of, I don't know, bear crowd or skepticism, or people trying to poke holes in the rally is like, oh, it's all tech. It's all the mag seven, these gigantic tech stocks, et cetera. What's interesting about lately is that actually, a lot of these high flyers like Nvidia, they've like sort of been flat for the last month or so.

And even that doesn't seem to be holding water. There actually are big rallies in many parts of the market.

So the question is like, why? I mean, you could say, oh, like the story maybe made sense. It's like, oh, there's these handful of mega giants. They're capturing all of the gains. And so what these new all-time highs don't really reflect what the broader market is doing. The broader market's doing fine.

Tracy Alloway (2:26)

Yeah. And again, against expectations. It's actually broadening out rather than becoming more narrow, which is the kind of thing that you would be worried about if you are in a bubble or about to enter a bubble.

But all right, I am very pleased to say that we do in fact have the perfect guest to discuss markets and whether or not we are closing in on bubble territory. We're going to be speaking with Savita Subramanian, head of US Equity Strategy at Bank of America. And she recently raised her target for the S&P 500 from 5,000 to 5,400. I think this was done about a month ago, and we're already at like 5,200. So yeah, good call. Savita, welcome to the show.

Savita Subramanian (3:09)

Hi, it's great to be here. Thanks for having me.

Tracy Alloway (3:12)

I feel kind of bad. I feel like we should have had you on way, way earlier, because you are sort of a stalwart of the sell-side research on stocks, and yet we haven't made it happen. Kind of weird.

Savita Subramanian (3:24)

That is weird, but we're correcting for past mistakes. Yes, OK.

Tracy Alloway (3:30)

This is good, a good type of correction. All right, S&P 500, pretty much at record highs. What's driving it?

Savita Subramanian (3:38)

Yeah, so it's interesting. When we launched our 2024 outlook in November with our year ahead report, and we launched our S&P market call with a 5,000 year end target. And I remember having to repeat that number.

People would literally say, did you just say 5,000? It was way too high. And now here we are at 52 whatever. And a couple of months ago, the market basically breezed right through that 5,000 target. And there's no perfect way to forecast a point in time target. In fact, I think it's kind of a silly number. But the question that we asked ourselves was, OK, now what? Does the market go higher or lower? Because we're kind of where we thought we would be by year end in January.