Art Hogan discussed what could be the ‘green light to get back into the market’

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on May 25, 2021
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  • Inflation has been the major investor concern over the past one month.
  • Broader markets have had a good run so far this year with S&P 500 up 13%.
  • Better handle on the directionality of inflation could be a green light to get back into the markets.

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National Securities’ chief market strategist Art Hogan was on CNBC to discuss the current volatility in the financial markets.

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He said we witnessed intraday choppiness in the month of May while the overall markets have been relatively flat for the month. This pattern should continue in the month of June as well. He noted that despite the recent bout of volatility, the broader markets have had a good run up this year so far.

S&P 500, Nasdaq and Dow Jones are up by around 13%, 14% and 7%, respectively, on a year-to-date basis. S&P 500 and Dow Jones are up slightly over the past month while Nasdaq is down 3% over the same timeframe.

Green light to get back in to the market

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Hogan said that investors have been concerned about inflation and we have seen the greatest volatility around reports on inflation whether it was the CPI which came in hot a couple of weeks ago and then the PPI. This week, we get the PCE.

“Once we get a better handle on the directionality of inflation, meaning what some of the inflation numbers look like sequentially on a month-over-month basis, and if we don’t see massive increases, I think it will be a green light to get back into the market,” added Hogan.

Speculative excesses have adjusted on a valuation basis

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He also added that the stretched valuations of EV stocks, crypto, reopening trades and technology stocks also added to the wild swings in the markets.

He expects the market choppiness to continue in the month of June while saying:

“Froth has come off the top, but I think we enter next month in a better place and firmer standing, at least on a valuation basis.”

Hogan had issued a year-end target of 4,300 for S&P 500 at the beginning of the year. It was based on S&P earnings estimate of about $186.

“I suspect that the consensus estimates are going to be in the $190s now, $191, $192 level,” Hogan said. “If we use the same multiple, that gets us to 4,400, and that’s likely something we’ll have to do next week.”

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