Beat the S&P easily by owning cyclicals and growth: Art Hogan

Investors may want to avoid having favorites.

National Securities’ Art Hogan said Monday that owning equal amounts of growth and cyclical stocks will yield big advantages as stocks soar.

“Nothing is going to be binary this year,” the company’s chief market strategist told CNBC’s “Trading Nation.” “Having a balance between those two and rebalancing every two months puts you in a position to beat the S&P easily.”

The S&P 500 and the Dow are starting the week in record territory. The S&P 500 gained 1.4% to close at 4,077.91, while the Dow rose 373.98 points to 33,527.19, both record highs. The high-tech Nasdaq benchmark index also rose 1.7% to 13,705.59.

“We often get to a point in markets where we think it’s one or the other. And, most of 2020 was mostly technology,” Hogan said. “After Labor Day, we have seen this shift from growth to economically sensitive cyclicals. That is also not a trade that lasts forever.”

Hogan, who oversees $ 20 billion in assets, released his official S&P 500 year-end forecast of 4,300 on January 4. With the rate down 5%, he said Monday it could come much earlier, particularly given the daily doses of vaccines in the US in the millions.

“As a result of that, there is hope for better economic activity, and we are clearly beginning to see that in some of the economic data for March,” he added. “Clearly, the March data is showing that the earnings estimates for the S&P 500 are probably conservative.”

His thesis is that an “explosion in economic activity” will put inflation fears at bay due to the upward impact it will have on corporate profits across the board. According to Hogan, it will contribute to a broad and healthy bull market.

On the cyclical or economically sensitive side, your main game is finances. Hogan speculated that it could be the best performing S&P group in 2021.

“Finance [are] obviously highly dependent on GDP growth. We’re going to see a lot more of that this year, “said Hogan, who also sees key benefits from rising interest rates.

To play a booming market on the growth side, he listed semiconductors as his first place.

“It’s going to be a very long road for us to get back to producing the number of semifinals that we need, and that number is growing every day,” Hogan said. “We have seen a shortage of semiconductor chips that negatively affects all kinds of industries, including automakers … They are very cyclical, but they have a large growth component.”



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