NEW YORK ( TheStreet) -- Bank of America Merrill Lynch's head of U.S. equity and quantitative strategy, Savita Subramanian, is expecting a "dramatic" rotation in sector leadership this year thanks to the popularity of defensive stocks that have rendered the sector "quite expensive." The S&P 500 fell 0.84% to settle at 1,612.52 Wednesday. "Leadership could be a big swing factor for the remainder of the year," Subramanian said at the bank's mid-year global outlook conference at the Bank of America Tower in Manhattan Wednesday. "Multiples are compressing within the more defensive sectors of the market and are actually starting to re-rate higher in the cyclical sectors," she said. At this juncture, Subramanian said that she's particularly positive about big, cash rich, cyclical-exposed technology sectors that are starting to turn into cash-return stories. Meanwhile her colleague, chief investment strategist Michael Hartnett, thinks that there are four bargains in the equity markets right now. Japanese and eurozone equities have been trading in the market at 1.3x book value, while developed market banks have been trading at 1.1x book value. The emerging market resource stocks have been trading at 0.9x book value. Hartnett said that every other stock in the world when added together is trading at 3.1x book value. As for the S&P 500, Subramanian is forecasting limited additional gains with a year-end target of 1,600 based purely on an earnings outlook of 5% to 6% earnings growth this year. She cautioned that this prediction may prove to be conservative given the market's attractive stock valuations right now. Bank of America analysts expect volatility to continue for the rest of the year amid ongoing central bank uncertainties. "It's a communication problem," said Ethan Harris, co-head of global economics research at Bank of America. "The Fed is not being clear on what constitutes data sufficient to exit QE, but will exit in a slow, careful fashion and only in the context of healthy U.S. growth." Harris himself notes that the U.S. still has a lot of spare capacity, and with unemployment still high and wage growth still low, he's wagering that there will only be a 30% chance that the Federal Reserve will taper this year. But even if it did so, it would merely be a technical adjustment, rather than an exit. "We aren't starting to accelerate yet," he said. Follow @atwtse Written by Andrea Tse in New York >To contact the writer of this article, click here: Andrea Tse.