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

Investors should avoid playing favorites.

Art Hogan of National Securities said Monday that owning equal growth stocks and cyclical stocks will be of great benefit when stocks break out.

“Nothing will be binary this year,” the company’s chief market strategist told CNBC’s Trading Nation. “If you can find a balance between these two and restore balance every few months, you will be able to handily beat the S&P.”

The S&P 500 and Dow start the week at record levels. 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 all-time highs. The benchmark’s tech-intensive Nasdaq also gained 1.7% to 13,705.59.

“We often get to a point in markets where we believe it is either / or. And most of 2020 has been mostly technology,” Hogan said. “After Labor Day, we saw this rotation out of growth and into economically sensitive cycles. This is also not a trade that goes on forever.”

Hogan, who oversees $ 20 billion in net worth, released his official S&P 500 year-end forecast of 4,300 on Jan. With the index 5% away, it said Monday it may arrive much earlier – especially due to the US vaccine doses in the millions every day.

“Along with that comes the hope of better economic activity and we see that clearly in some economic data from March,” he added. “The March data clearly shows that earnings estimates for the S&P 500 are likely to be conservative.”

His thesis is that an “explosion in economic activity” will keep inflation fears in check across the board due to the positive impact on corporate profits. According to Hogan, this will contribute to a healthy, broad-based uptrend in the market.

On the cyclical or economically sensitive side, his top game is finance. Hogan speculated it could be the top performing S&P group by 2021.

“Finance [are] obviously very dependent on GDP growth. We’ll see a lot more of it this year, “said Hogan, who also sees the main benefits of rising interest rates.

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

“It will be a very long time before we can produce the number of semis we need again, and that number is growing day by day,” said Hogan. “We have seen a shortage in semiconductor chips that is detrimental to all kinds of industries, including automakers. … They are very cyclical, but they have a huge growth component.”

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