Savita Subramanian came on the podcast last week and did not disappoint!
Savita is the Head of US Equity Strategy and Quantitative Strategy at Bank of America and one of the most followed investment strategists on Wall Street. If you missed the episode, don’t worry—I’ve pulled out some highlights (and a couple of her epic charts).
Valuations Aren’t Always a Problem
The value investor in me struggles to invest in a market when most valuation metrics are stretched, but Savita offered a fresh perspective:
“When you buy the S&P 500 today, it’s not fair to compare its valuation multiple to the S&P of 1980. The index has fundamentally changed—half of it is now comprised of asset-light, labor-light industries like tech and healthcare with high margins. Back then, the market was dominated by asset-heavy, capital-intensive sectors like manufacturing, which had structurally lower margins.”
Take a look at how the S&P 500 has evolved over the decades:
The Case for Total Return Investing
In the last decade, total returns have been dominated by price appreciation. But Savita thinks dividends are going to make a comeback:
“We’re going back to a world where dividends play a much larger role in total returns. Over the past decade, price appreciation dominated, but historically, dividends have contributed nearly half of total returns for the S&P 500.”
Both of the charts below highlight this:
It’s Time to Get Selective
Savita emphasized the importance of moving beyond index-level thinking in today’s market:
“This is the year where you really want to get selective. Don’t buy the index—buy stocks that look attractive within the benchmark. The index is skewed by a handful of mega-cap companies, and we believe there’s value to be found elsewhere.”
Translation: equal-weight S&P 500
You can listen to the episode on Apple or Spotify or watch along with charts on YouTube.
