Bank of America's top stock strategist says risks are 'skewed to the downside' for 2021

Published Tue, Dec 8 20209:12 AM EST

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). Bank of America's top equity strategist defended her cautious view on the stock market for next year on Tuesday, saying that the benefits of an economic recovery are largely priced in to stocks Savita Subramanian, the bank's head of U.S. equity and quantitative strategy, said on CNBC's " Squawk Box " that the risks to the market are "skewed to the downside." "Next year is going to be a great year for the earnings, and I think it's going to be a better year for the economy than it's going to be for asset prices. I guess, put simply, a lot of the gains from a recovery are already priced in to stocks," Subramanian said. The bank's end-of-2021 target for the S & P 500 is 3,800, just 3.3% above where the index closed on Monday. That stance is cautious relative to several other Wall Street firms, including a target of 4,300 from Goldman Sachs . Subramanian said that the downside risks to the market include complications in the vaccine rollout and a slowing or stopping of stimulus from Fed and Congress. She said "the market has grown dependent on the stimulus machine." One area where Bank of America's outlook differs from other strategists is the strength of the consumer recovery. Some have argued that the buildup in household savings due to stimulus programs and restricted economic activity could create a consumer boom in 2021. However, Subramanian said that the strength of the consumer during the pandemic was a sign that there wouldn't be a surge in demand after the vaccine was widely distributed. "There's been a lot of sources of bolstering consumer demand this year that haven't necessarily been the case in prior recessions, so the idea of moving into next year with a lot of pent up consumer demand is harder to argue for," Subramanian said, adding that Bank of America has an equal weight rating on consumer cyclicals One upside risk the strategist mentioned was improving business investment, as companies have delayed capital spending during the pandemic and there is expected to be less uncertainty about trade policy under President Joe Biden.

View of the New York Stock Exchange at Wall Street on Nov. 16, 2020 in New York City.

Angela Weiss | AFP | Getty Images

(This story is for CNBC Pro subscribers only).

Bank of America's top equity strategist defended her cautious view on the stock market for next year on Tuesday, saying that the benefits of an economic recovery are largely priced in to stocks

Savita Subramanian, the bank's head of U.S. equity and quantitative strategy, said on CNBC's "Squawk Box" that the risks to the market are "skewed to the downside."