National Securities’ Art Hogan believes inflation won’t be a problem for Wall Street this year.
He acknowledges that rising government bond yields tend to put pressure on future growth. But in this case, Hogan sees an epic corporate earnings comeback softening the impact.
“We will see an explosion in economic activity,” the company’s chief market strategist told CNBC’s “Trading Nation” on Friday. “The economy will do better in the second half of this year as we normalize our business with the roll-out of vaccines and virus numbers down.”
Last week, the yield on 10-year government bonds on the benchmark rose by almost 12% to 1.34%. However, the yield is still considered low by historical standards.
“It’s important to understand why it is rising – rather than just what if it gets too high and starts pulling money out of stocks and fixed income,” he said. “We are nowhere near that level.”
According to Hogan, prices will still go up. However, record rates for personal and business savings should also alleviate higher prices due to the recovery and rising demand.
“A few of those [prices] will be transient, and some of which will be permanent changes, “he said.” Semiconductor chips, for example, are currently on fire because of a shortage. They prevent car manufacturers from producing cars. ‘
‘We have a balanced approach’
Hogan, who oversees $ 15 billion in assets under management, applies a lengthy investment strategy within its 60% equity and 40% bond portfolio.
“We have a balanced approach to technology and cyclical products,” he said. “Every two months we make sure the barbell is the same.”
Within days, Hogan plans to add technology and growth names to balance the profits he’s built in cyclical sectors. He has used this strategy during the coronavirus crisis.
“Over the past 20 years, some of the best bull markets we’ve seen have been in soaring yields,” he said.
Hogan has an S&P 500 end-of-year price target of 4,300, meaning a 10% gain from Friday’s close.
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