BofA's S&P forecast for 2017: Between 2,700 and 1,600

BofA: Risk/reward more important than absolute targets

The market could see one of its greatest performances next year if Donald Trump's administration delivers on its policy goals, equity strategist Savita Subramanian told CNBC on Wednesday.

That's one scenario — in which the climbs more than 20 percent from its current level. There's also another scenario, however, where the market plunges.

It all depends on policy, and whether Trump is able to push through his aggressive growth plans. A more likely scenario is something in between during a whipsaw year for the market.

"In our bull case scenario, we think the market (as measured by the S&P 500) could go as high as 2,700 on the idea that policymakers deliver," Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch, said on "Fast Money Halftime Report."

"We get stimulus. We get tax cuts. We get, you know, slowly rising interest rates," she added. "We get kind of healthy inflation and everything kind of comes in just right."

President-elect Trump's policy proposals — greater infrastructure spending, tax cuts and deregulation — have sent stocks higher since the election on Nov. 8.

Many of those proposed policies will take time, but as long as investors focus on the good, the market should perform well, Subramanian said. If policymakers fail to deliver or the U.S. gets the negative side of the policy proposals, she said it could cause, at worst, a recession.

"In that scenario we see the market as low as 1,600. Really kind of a binary year," Subramanian said.

"This is really bad policy. We get all the negatives, and the positives are underdelivered," she told journalists at a briefing earlier in the day at the firm's New York offices. "This is basically trade wars, protectionists trade policies. Instead of healthy inflation we get stagflation, rates maybe rise too quickly or they don't rise at all."

Subramanian said there's a "reasonable likelihood of a recession in the next 12 months," something the market isn't pricing in. However, she noted that the indicators she uses to foretell recessions have improved lately.

While the possible outcomes sit at opposing ends of a wide-swinging pendulum, BofAML expects the reality to be considerably less dramatic.

The price target for the end of the year is 2,300, a gain of just about 3 percent from the current level considering Wednesday's strong rally.

For sector plays, Subramanian said the firm is overweight health care, financials and telecom, and underweight consumer staples, utilities and materials.

"We're really listening to the rhetoric in D.C. We're trying to figure out how likely it is we will be the growth-improving reforms we've heard about," she said.