‘Boring Is Good’: BofA Strategist Favors Dividend Stocks

The election, the economy, just how big this week’s U.S. interest rate cut will be — it has all left the market on edge. Savita Subramanian, an equity and quant strategist at Bank of America Corp., wants investors to avoid risks.

“You want to be in safe dividends — and I know this is the most boring call of all time, but sometimes boring is good,” Subramanian said in an interview with Bloomberg Television on Monday.

With the Federal Reserve likely to kick off its rate cuts on Wednesday but inflation staying high, sectors like financials, utilities and real estate will likely see inflows as retirees pull out of money-market funds, the strategist said. Large-cap value stocks “look incredibly attractive,” she added.

Investors have been torn between staying the course and chasing the big technology stocks responsible for much of the market’s gains this year or starting to prepare their portfolios for a slowdown as they weigh whether the US central bank can navigate the economy to a soft landing.

Tech has slumped while real estate and utilities were the best-performing sectors within the S&P 500 so far in the second half, both rising more than 14% since the end of June. Financials ranked fourth among all sectors, while energy ranked last with around a 6% decline.

The S&P 500 Value Index, meanwhile, has risen roughly 7% as growth counterparts traded little changed. Still, the S&P 500 Growth Index is ahead on a year-to-date basis, with a more than 20% advance beating the value benchmark’s nearly 12% gain.

The strategist said she was positive on financial services companies, as regulations have likely peaked for big banks and artificial intelligence tools are driving efficiency gains. She rates utilities and real estate as overweight, citing their dividend yields and protection against inflation.

And despite the pullback in energy stocks, Subramanian said it’s too early to buy the dip. The sector now looks like a “classic value trap” as stock prices fall faster than the pace of downgrades to analyst earnings forecasts, she said.

The strategist is also negative on big-cap tech stocks, rating information technology as underweight due to risks of crowded positioning. Interest rates will likely further pressure the sector as rates are unlikely to fall to pre-pandemic lows, she said.

Savita Subramanian (Credit: Bloomberg)

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