The Meb Faber Show
The Meb Faber Show
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Meb Faber
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BofA's Savita Subramanian on The New S&P 500: AI-Driven and Asset-Light | #567

Jan 24, 2025 • 62 mins

My guest today is Savita Subramanian, Bank of America’s Head of U.S. Equity Strategy & U.S. Quantitative Strategy. Barron’s named Savita as one of the 100 Most Influential Women in U.S. Finance. In today’s episode, we cover the key trends shaping markets as we start 2025. Savita discusses the evolution of the S&P 500 over the past 50 years and why that leads her to be more comfortable with higher valuations today. Then she explains why productivity gains could drive the next bull market and why corporate margins have remained elevated despite inflation volatility. Plus, Savita weighs in on the future of small, mid, and large caps and why she favors selective stock picking over buying the index.

Key Points

  • US stocks have seen significant outperformance since 2009, largely due to a concentrated surge in a few mega-cap tech companies, whereas other indices have remained relatively flat.
  • Valuation metrics can be misleading for short-term market predictions but are crucial for long-term investment outcomes, as demonstrated by the historical relationship between valuation and future returns over extended periods.
  • Despite high interest rates, US equities, particularly large-cap value stocks, offer attractive opportunities for income and inflation protection, suggesting a shift back to a total return investment approach that includes dividends.

Follow Savita: LinkedIn

Sponsor: Farmland LP is one of the largest investment funds in the US focused on converting chemical-based conventional farmland to organic, sustainably-managed farmland using a value-add commercial real estate strategy in the agriculture sector.

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