Investors should proceed with caution, according to BofA Securities' Savita Subramanian.
Even though February kicked off on a strong note, she warned on CNBC's "Fast Money" a messy sideways market is ahead.
"It's going to be a year where we are shocked by the volatility," the firm's U.S. head of equity and quantitative research said Tuesday. "This is a year where we recalibrate expectations to an environment where cash yields are likely to move from zero — worthless today — to something closer to 2% by the end of the year."
"I just don't think it's time to buy the S&P 500 wholesale," said Subramanian. "I don't think this is going to be a year where the S&P turns in great returns."
Based on the CNBC market strategist survey, Subramanian has the second lowest S&P 500 price target on the Street. Her target is 4,600, which implies a 1% loss from Tuesday's close and about a 5% drop from the index's all-time high.
"Between today and year end, we're going to hit that target multiple times, and we're going to see some big swing from the market," she said.
And, Subramanian believes the Fed won't come to the rescue.
"We need to get used to the idea that asset inflation may be behind us, and we're now heading for real inflation," she noted.
BofA's economic team predicts the Federal Reserve will hike rates seven times this year. Subramanian anticipates the moves will create acute pain for popular areas of the market.
"I don't think the market is pricing that in," said Subramanian. "What gets hurt are some of these longer duration growth stocks in an environment where discount rates are rising. And, that's where I think the S&P might be in trouble because that's a bigger weight in the benchmark."
Subramanian's advice to investors: Avoid Big Cap Tech and growth names which thrived during the era of free capital and no earnings. Instead, look for high quality stocks trading at lower prices.
"The good news is that corporations and consumers are holding a lot more cash than they were back in 2008 [and] 2009," said Subramanian. "This could actually be a better environment for some of the cash-rich corporates."
Subramanian lists energy as an example. It was Tuesday's best performing S&P 500 group.
"It still offers much higher free cash flow than say TIPS or other proxies for inflation protection." she said. "It's still one of the most underweighted sectors by long only managers."
"My mantra for the year is just to use volatility as a buying opportunity for high quality, free cash flow yielders," Subramanian said.