Bank of America has a recession warning that's downright 'scary'

There's a chilling trend in the market, and it could wreak havoc on your portfolio, a top market watcher said.

"We are seven years into a full-fledged, all out, central bankers doing everything they can to stimulate demand," Bank of America-Merrill Lynch's head of U.S. equity and quantitative strategy Savita Subramanian recently warned on CNBC's " Fast Money ."

"We looked at all of these indicators that have been pretty good at forecasting recessions and we extrapolated that if they follow the current trends they're on, we're going to hit a recession sometime in the second half of next year."

The most unsettling thing is that this recession risk isn't discounted into the market at these levels, according to Subramanian.

The S&P is 1.8-percent away from its intraday all-time high of 2,193.81, hit on August 15. Subramanian's year-end 2016 S&P 500 (INDEX: .SPX) price target is 2000, about seven percent lower than where it's trading today. And, if she's right, it's about to get a lot worse next year.

"What scares me is the market been so fragile. So, remember what happened in January? We got a whiff of bad news and all of the sudden the market is at 1800," she said—a move that augured poorly for the near-term.

"I think that speaks to the reaction function of the market. There are a lot of itchy trigger fingers. There's lot of violent trades that can really roil a fairly complacent environment."

Even though Subramanian acknowledged there's a lot more risk than reward at this point, she says the health care and technology sectors look the best right now.

"They are both pretty cheap on a relative basis," she said.

"Health care has taken it on the chin because of Hillary [Clinton] risk and fears that the M&A cycle is over," she said, referencing the 2016 elections. Some sector analysts perceive Democratic nominee Hillary Clinton as a risk to the sector, mainly because of her stances on drug companies and health care.

It's now trading at almost the lowest multiples we've ever seen," Subramanian said. "But, meanwhile it actually has good growth."

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