BofA’s US stock chief sees a floor of 3,200 for the S&P 500 (potential downside of 22%) — but here are 4 sectors she likes for inflation protection and cash return

We’re almost halfway through the year, and sentiment has yet to turn bullish.

The S&P 500 is down 13% in 2022, while the tech-centric Nasdaq is off 22%.

If you want to know how low the market could really go, pay attention to what Savita Subramanian — head of U.S. equity and quantitative strategy at Bank of America Securities — has to say.

“We calculate that a floor on the market is 3,200, even in a recession case,” she told Bloomberg earlier this week.

The S&P 500 currently sits at roughly 4,100, so that market floor call represents potential downside of around 23%.

But that doesn’t mean you should bail on stocks.

“I do think that equities offer inflation protection and cash return,” she added.

Not all sectors are the same, though. Subramanian suggests investors look into energy, financials, healthcare, and consumer staples.

“These are areas of the market that are less susceptible to the vagaries and the negative impacts of inflation but can actually benefit from a pickup in inflation and are relatively healthy and paying healthy dividends relative to fixed income and other parts of the capital spectrum.”

Let’s take a closer look at those sectors – and see how investors can get easy access to them.

Energy

Fueled by rising commodity prices, energy was the S&P 500’s best-performing sector in 2021, returning a total of 53% vs the index’s 27% return. And that momentum has carried into 2022.

Year to date, the Energy Select Sector SPDR Fund (XLE) is up a whopping 55%, in stark contrast to the broad market’s double-digit decline.

XLE aims to track the performance of the S&P 500’s energy sector. If the positive momentum in energy prices continues, the ETF is a good bet to keep delivering market-topping returns.

XLE also provides a good starting point for further research if you are looking for individual picks. Its top holdings include oil giants like Exxon Mobil (XOM), Chevron (CVX),…