The S&P 500 may have surged 10 percent since its Feb. 11 low, but a Bank of America-Merrill Lynch strategist is warning the bounce is on very shaky ground.

Publicly traded companies have seen negative earnings growth two quarters in a row and there are no fundamental underpinnings for the rally, Savita Subramanian, BofAML's head of U.S. equity and quantitative strategy, said on CNBC's "Fast Money" this week.

"We are in a profits recession. There (are) no two ways around it," said Subramanian, whose S&P 500 price target of 2,000 is among the lowest on Wall Street. She is also concerned about how Federal Reserve monetary policy could affect stocks.

"You have the Fed embarking on a long, slow tightening cycle. Tightening into a profits recession doesn't sound like anything to throw a big party about," she said.

The result? Widening credit spreads and the capital markets basically shutting down, Subramanian said.

"We had zero IPOs in January... Normally you see about $15 billion come to market in the first month of the year. Nobody is raising capital," she said. Covering of short positions, or bearish bets that certain stocks will fall, and other positionings have been behind the recent rally, she added.

"We need to see some kind of material sales growth, and that's been the missing link. Look at all the earnings reports we've seen. It's earnings beat, but sales miss," Subramanian added. "They are manufacturing earnings through buybacks or cost-cutting. But it's not real growth that we're seeing at a fundamental level."

Consumer discretionary names are most susceptible to the market's vulnerabilities, she said, citing a lack of pricing power as fast fashion names and other competitors grab a bigger portion of business.

She recommended sticking to areas with pricing power such as old technology and health care stocks. Despite her negative outlook on the S&P 500, she maintains that investors should stick with large caps over small-cap stocks.

Investors will find out if there will be a third straight period of negative growth when earnings season kicks off on April 13, the day JPMorgan Chase is set to deliver first quarter results.