Market bull Art Hogan looks beyond the difficult start of the trading week.
National Securities’ market strategist believes the violent movements will set the stage for a massive comeback that will prompt him to raise his S&P 500 year-end target.
“Here we are with everything that is for sale in a risk-free mode. People who pile into the state coffers,” Hogan told CNBC’s “Trading Nation” on Monday. “It’s probably all going to be stretched.”
The Dow had its worst day on Monday due to nervousness related to risks of the Covid-19 Delta variant. The S&P 500 and tech-heavy Nasdaq saw their biggest falls since May. In addition, the benchmark yield on 10-year Treasury Notes slipped to 1.17%, a five-month low.
“This is a spot on the radar screen,” said Hogan.
Hogan believes a 5 to 10% drawdown is unfolding. But he emphasizes that it would be taken for granted.
“We have an average drawdown of 5% every year. Often times we have a 10% annual drawdown, ”Hogan noted.
In this environment, he encourages long-term investors to weight growth and cyclical stocks equally. He has the strategy that goes back to the early days of the pandemic.
“If you rebalance that every two months and keep that barbell level, I think you will outperform the S&P 500,” he said. “You did that last year and you will probably do it again this year.”
On the growth side, Hogan likes 5G, cloud security, and cloud computing. Of the cyclicals, he likes financials, energy, industrials, and materials best.
Hogan, who has $ 20 billion under management, admits Covid-19 risks are on the rise. However, he doubts that this will mean extreme restrictions and a significant slowdown in economic growth.
“We have a very short-term memory and a very well trained memory muscle [Covid] is increasing, “he said.” This current wave is likely to peak and we will get back to focus on things we should focus on like big earnings growth. “
Hogan predicts the current earnings season for the second quarter will significantly outperform Wall Street estimates. If so, he expects to raise his S&P 500 year-end target from 4,400, a 3% increase from Monday’s closing price.
“This market has a lot of upside potential. Volatility is part of that process,” said Hogan. “Remember, this is an economy that is just reopening and these are consumers who are just starting to get back into action.”
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