The latest jump in Treasury yields is not “death to equities,” BofA Securities’ Savita Subramanian told CNBC’s “Fast Money” on Tuesday.
In fact, Subramanian sees the bond move as a positive signal — rather than an ominous sign for the economy.
“Companies are refocusing on efficiency and productivity rather than juicing up earnings through leverage buybacks and cheap financing costs,” the firm’s head of equity and quantitative strategy said. The head of equity and quantitative strategy at the firm said that companies are refocusing on efficiency and productivity rather than juicing up earnings through leverage buybacks and cheap financing costs. They have AI [artificial intelligence]. They have automation. “
Subramanian describes herself as having the most positive view on stocks since the 2008 financial crisis, saying that productivity will drive the next leg of the bull market.
“We’re past this experiment of QE [quantitative easing] and zero interest rates and negative real rates and all of this really kind of unnerving stuff that has been hard to allow us to actually value equities appropriately,” she said. “We may not see as high returns, but there are more real returns.” Subramanian raised her S&P 500
target for the year’s end by 7.5% in May. The range was as high as 4600. The index closed Tuesday at 4,496.63. The S&P is now up 17% year to date.“Companies have actually gotten very disciplined about leverage,” Subramanian said. This is the lesson everyone learned in 2008, and even consumers are now more disciplined. “She also finds
industrials
, energy and financials as sectors that should withstand the higher rates. Subramanian believes that corporate America is now able to make do with less. However, she does not believe stocks will rise in a straight-line. Subramanian stated that she believes we are now at a stage where we can see what the Fed will do. They’ve done most of the hardwork. We’re at 5% for short rates. We should be pleased about this because it means that we can take our time in the next recession. “Disclaimer