National Hecurities, Art Hogan, believes inflation will not cause problems for Wall Street this year.
He acknowledges that rising treasury yields are likely to put pressure on future growth. But in this case, Hogan sees an epic return on corporate earnings that mitigates 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 last half of this year as we normalize activities with vaccination and vaccination.”
Last week, the standard 10-year treasury yield rose nearly 12% to 1.34%. However, yields are still considered low by historical standards.
“It’s important to understand why it’s rising – as opposed to just what happens when it gets too high and starts attracting money from stocks and fixed income,” he said. “We are nowhere near the level yet.”
According to Hogan, prices will continue to rise. However, record rates for personal and corporate savings should also be offset by higher prices through the recovery and rising demand.
‘Some of it [prices] “will be transient, and some of it will be permanent changes,” he said. For example, semiconductor chips are currently burning 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 barbell investment strategy in its 60% equity and 40% bond portfolio.
“We have a balanced approach to technology and cyclics,” he said. “Every two months we make sure the barbell is level.”
Within the next few days, Hogan plans to add technology and growth names to balance the profits he has built up in cycles. He used this strategy during the coronavirus crisis.
“The last twenty years have been the best bull markets we have seen in rising yields,” he said.
Hogan has an S&P 500 price target for the year-end of 4,300, which means a 10% profit after Friday.
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