Savita Subramanian

I think we are in a point where you want to play the stagflation playbook. A little known fact, one of the best-performing indices during the 70's for inflation was large-cap value. In a stagflationary environment characterized by sticky inflation and rising interest rates, long-duration growth stocks suffer severe multiple compression. Large-cap value stocks, which typically have near-term cash flows, strong balance sheets, and pricing power, become the optimal safe haven for equity allocations. LONG If the oil shock causes a deep, immediate recession rather than stagflation, value stocks (which are often economically sensitive) could still suffer absolute drawdowns.

Energy stocks benefit from higher nominal GDP growth, inflation protection, and are more than just a geopolitical hedge; power is the bottleneck for AI, driving commodity demand and making energy an attractive sector.

The U.S. economy is running very healthy, corporate earnings are tracking 20% growth, and hyperscaler capex provides stability. Cyclical, GDP-sensitive companies remain cheap and offer the best risk/reward in a strong nominal GDP environment. This is the area of the market to favor over the next 12 months and beyond.

Materials sector is attractive for similar reasons as energy: rising inflation, AI-driven infrastructure build, and commodity upside, making it a strong cyclical play.

Tech and financials are sectors where many stocks have been rejected due to geopolitical risk and have not come back, presenting idiosyncratic opportunities. She also suggests buying dips in tech.

Tech and financials are sectors where many stocks have been rejected due to geopolitical risk and have not come back, presenting idiosyncratic opportunities. She also suggests buying dips in tech.

Tech, semis, software, and hardware have seen a healthier reset: earnings and cash flow are healthy while multiples have come down, leaving pockets of the market more rational; she likes tech after the correction.

Heading into a seasonally turbulent period, the risk is being complacent in the index; she likes S&P 500 large cap value as downside protection and says investors can park there and set it and forget it. Large cap value has kept pace with growth over the last one, two, and three years and now includes tech, not just energy and financials.

The U.S. economy is running very healthy, corporate earnings are tracking 20% growth, and hyperscaler capex provides stability. Cyclical, GDP-sensitive companies remain cheap and offer the best risk/reward in a strong nominal GDP environment. This is the area of the market to favor over the next 12 months and beyond.

Commodities broadly are bullish because AI power demands and building activity will drive increased demand across various raw materials, creating a tailwind for the asset class.

Consumer staples are favored over consumer discretionary because the consumer is under pressure from higher prices and AI's impact on higher-paying jobs is pausing, while lower-income cohorts see wage growth, making staples safer.

I think we are in a point where you want to play the stagflation playbook. A little known fact, one of the best-performing indices during the 70's for inflation was large-cap value. In a stagflationary environment characterized by sticky inflation and rising interest rates, long-duration growth stocks suffer severe multiple compression. Large-cap value stocks, which typically have near-term cash flows, strong balance sheets, and pricing power, become the optimal safe haven for equity allocations. LONG If the oil shock causes a deep, immediate recession rather than stagflation, value stocks (which are often economically sensitive) could still suffer absolute drawdowns.

We are underweight consumer discretionary, I think the consumer is not going to do as well this year in terms of spending on once over needs. Gasoline prices approaching $4 to $5 a gallon act as a massive regressive tax on the consumer. As household budgets are consumed by non-discretionary energy and food costs, spending on retail, leisure, and big-ticket items will plummet. SHORT Fiscal stimulus (like a gas tax holiday) or a rapid drop in oil prices could quickly restore consumer purchasing power.