Subramanian Versus Golub on Inflation Bets: ‘Don’t Be a Chicken’
(Bloomberg) -- A heated debate over inflation is pitting two of Wall Street’s most widely followed equity strategists against each other.
Bank of America Corp.’s Savita Subramanian and Credit Suisse Group AG’s Jonathan Golub went toe-to-toe Thursday on Bloomberg TV over how to approach stock investing in a post-pandemic world.
Both agreed that inflation is picking up and money managers can’t afford to ignore it. For Subramanian, it’s a great environment to separate winners from losers based on their capacity to pass on higher costs to customers without hurting sales.
Golub, however, wasn’t so sure. Companies have broadly proven their adeptness at defending profit margins, overwhelming any attempt to pick stocks based on pricing power, he said. Indeed, almost 90% of S&P 500 firms beat analyst estimates for the first quarter. And what was forecast to be a 23% increase in earnings turned out to a 54% surge, data compiled by Bloomberg Intelligence show.
“When you end up with numbers that are this big because of this dislocation, trying to use a scalpel when the right tool is a chainsaw is a mistake,” Golub said.
While Subramanian acknowledges that corporate America has done well coping with accelerating price pressures, she doubts it will last, especially when wage costs are likely to increase. She recommends investors buy companies poised to benefit most from a growth rebound and avoid those that may face a squeeze in profit margins, such as industrial manufacturers and makers of consumer products.
“Don’t be a chicken. Buy energy, buy financials,” she said. “Go for the gusto. Go for the reflation plays. I think the economy is going to surprise to the upside.”
For Golub, the ramifications of the post-pandemic reflation pickup are still uncertain and difficult to predict, and investors would be better off focusing on the big picture.
“The biggest thing to do is, catch the big wave, ride it big and then be nuanced later,” Golub said.
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