‘Boring is good’: Here’s where investors should look for safety amid rising uncertainty, according to BofA’s stock strategy chief

Traders should look to avoid risks and hide in safe dividend stocks as the market faces rising uncertainty, Bank of America chief equity strategist Savita Subramanian said.

“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 a Monday interview with Bloomberg Television.

Subramanian pointed to sectors like financials, utilities, and real estate. Those areas of the market stand to benefit from retirees funneling funds out of money market accounts as rates fall and inflation remains high, she said.

“Retirees need real yield,” Subramanian said, adding that those sectors “might not seem safe, but today I think they’re higher quality than they have been in a very long time.”

Subramanian’s call favoring safe haven areas of the market comes as uncertainty rises for investors, with November’s US presidential election looming and pending interest rate cuts widely expected from the Federal Reserve’s meeting this week.

Lower rates could end up pressuring crowded areas like tech, since rates will drop slightly but not nearly as low as they were pre-pandemic, Subramanian said.

“We’re not going back to that disinflationary environment where you’ve got zero interest rates forever. And I think that’s what puts pressure on tech and some of these areas of the market that are still very loved and very crowded,” Subramanian said.

In addition to safe dividend names, investors should look to large-cap value stocks, which “look incredibly attractive,” according to Subramanian”

She says large caps in sectors like banking, real estate and energy will be able to perform well even amid still-high interest rates.

“It’s companies that haven’t really had access to capital for a very long time. And now they’re sort of trained to survive in a higher interest rate, higher real rate environment,” Subramanian said.

Investors expect the Fed to cut rates this week, with odds rising in recent days for a 50 basis point move, according to CME’s FedWatch tool.

Some fear that such a big initial cut would reinforce economic growth concerns, which could trigger a sell-off in markets.