National Securities’ Art Hogan believes that inflation will pose no problems for Wall Street this year.
He recognizes that increasing Treasury yields usually puts pressure on future growth. But in this case, Hogan sees an epic return on corporate earnings by mitigating 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 improve in the second half of this year as we normalize activities with vaccines launched and virus counts decreasing.”
Last week, the 10-year Treasury Notes benchmark yield shot up almost 12% to 1.34%. However, yield is still considered low by historical standards.
“It is important to understand why it is going up – instead of just going up and getting too high and starting to attract stock money for fixed income,” he said. “We are nowhere near that level yet.”
According to Hogan, prices will still rise. However, record personal and corporate savings rates are also expected to ease the higher prices stemming from the recovery and rising demand.
“Some of these [prices] will be transient, and some of them will be permanent changes, “he said.” For example, semiconductor chips are on fire now because there is a shortage of them. They are preventing automakers from producing cars. “
‘We have a balanced approach’
Hogan, who oversees $ 15 billion in assets under management, is using a barbell investment strategy in his portfolio of 60% stocks and 40% bonds.
“We have a balanced approach to technology and cyclicals,” he said. “Every two months, we make sure that the bar is level.”
In the coming days, Hogan plans to add technology and growth names to balance the gains he has accumulated in cycles. He has used this strategy during the coronavirus crisis.
“In the past 20 years, some of the best bull markets we have seen have been in high yield environments,” he said.
Hogan has an S&P 500 end-of-year price target of 4,300, which implies a 10% gain from Friday’s close.
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