National Securities’ Art Hogan believes inflation won’t spell trouble for Wall Street this year.
He acknowledges rising Treasury yields typically put pressure on future growth. But in this case, Hogan sees an epic corporate earnings comeback mitigating the impact.
“We’re going to see an explosion of economic activity,” the firm’s chief market strategist told CNBC’s “Trading Nation” on Friday. “The economy is going to do better in the back half of this year as we normalize activities with vaccines rolling out and virus counts coming down.”
Last week, the benchmark 10-year Treasury Note yield spiked almost 12% to 1.34%. However, the yield is still considered low by historical standards.
“It’s important to understand the why it’s going up — versus just the what if it gets too high and starts attracting money out of equities and into fixed income,” he said. “We’re not anywhere close to that level yet.”
According to Hogan, prices will still go up. However, record personal and corporate savings rates should also alleviate higher prices brought on by the recovery and surging demand.
“Some of those [prices] will be transitory, and some of those will be permanent changes,” he said. “For example, semiconductor chips are on fire right now because there is a shortage of those. They’re keeping automakers from being able to produce cars.”
‘We’ve got a balanced approach’
Hogan, who oversees $15 billion in assets under management, is using a barbell investment strategy within his 60% equities and 40% bonds portfolio.
“We’ve got a balanced approach to technology and cyclicals,” he said. “Every two months, we make sure that barbell is even.”
Within the next few days, Hogan plans to add technology and growth names in order to balance out gains he accumulated in cyclicals. He’s been using this strategy throughout the coronavirus crisis.
“Over the last 20 years, some of the best bull markets we’ve seen have been in rising yield environments,” he said.
Hogan has an S&P 500 year-end price target of 4,300, which implies a 10% gain from Friday’s close.