National Securities’ Art Hogan believes inflation will not be a problem for Wall Street this year.
He acknowledges that rising Treasury yields often put pressure on future growth. But in this case, Hogan sees an epic reappearance of corporate profits mitigating the impact.
“We will see an explosion of economic activity,” the firm’s chief market strategist told CNBC’s “Trading Nation” on Friday. “The economy will improve in the middle of this year, as we normalize activities with the deployment of vaccines and the number of viruses decreasing.”
Last week, the yield on the 10-year benchmark Treasury note rose nearly 12% to 1.34%. However, performance is still considered low by historical standards.
“It’s important to understand why it increases, as opposed to what happens if it gets too much and starts attracting equity and fixed income money,” he said. “We’re not close to that level yet.”
According to Hogan, prices will still rise. However, personal and corporate savings rates should also alleviate higher prices caused by the recovery and growing demand.
“Some of these [prices] they will be transient, and some of those will be permanent changes, “he said.” For example, semiconductor chips are on fire right now because there is a shortage. They prevent car manufacturers from producing cars. “
“We have a balanced approach”
Hogan, which oversees $ 15 billion in assets under management, uses a bar investment strategy within its 60% and 40% equity portfolio.
“We have a balanced approach to technology and cycles,” he said. “Every two months, we make sure the bar is even.”
Over the next few days, Hogan plans to add names of technology and growth in order to offset the accumulated gains in cycles. He has been using this strategy throughout the coronavirus crisis.
“Over the last 20 years, some of the best stock markets we’ve seen have been in growing performance environments,” he said.
Hogan has an S&P 500 pricing target of 4,300 at the end of the year, which implies a 10% gain since Friday’s close.
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