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The “explosion in economic activity” could keep inflation fears at bay. Here’s why

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Art Hogan of National Securities believes inflation won’t be a problem for Wall Street this year.

He admits that rising government bond yields typically put pressure on future growth. In this case, however, Hogan sees an epic comeback in corporate earnings that mitigates the impact.

“We’re going to see an explosion in economic activity,” the company’s chief market strategist told CNBC’s “Trading Nation” on Friday. “The economy will do better in the second half of this year as we normalize activity with the introduction of vaccines and falling virus counts.”

Last week, the benchmark 10-year treasury note yield rose nearly 12% to 1.34%. However, the return is still viewed as low by historical standards.

“It’s important to understand why it is rising – as opposed to what happens when it gets too high and starts pulling money from stocks into fixed income,” he said. “We’re not anywhere near that level yet.”

According to Hogan, prices will continue to rise. However, record savings rates for individuals and businesses are also likely to moderate higher prices driven by the recovery and rising demand.

“Some of these [prices] will be temporary and some of these will be permanent changes, “he said.” For example, semiconductor chips are currently burning because there is a shortage of them. They keep automakers from being able to produce cars. “

“We have a balanced approach”

Hogan, who has $ 15 billion under management, has a barbell investment strategy in its 60% stocks and 40% bonds portfolio.

“We have a balanced approach to technology and cyclicals,” he said. “Every two months we make sure the barbell is even.”

In the next few days, Hogan plans to add technology and growth names to offset the gains it made in cyclicals. He has used this strategy throughout the coronavirus crisis.

“In the past 20 years, some of the best bull markets we’ve seen have been in an environment of rising yields,” he said.

Hogan has a year-end S&P 500 price target of 4,300, which is a 10% gain from Friday’s close of trading.

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Katherine Clark