The S&P 500 (^GSPC) has been pushed to new heights this year as the tech sector makes major gains fueled by the AI boom. B. Riley Wealth Chief Market Strategist Art Hogan joins Market Domination to discuss the index's rally and whether it could keep up the momentum.

"I think it's a perfect example of a lot of folks being concerned that Nvidia (NVDA) and arguably Nvidia, Microsoft (MSFT), and Apple (AAPL) were such a big part of the 15% that the S&P 500 is higher this year on a year to date basis... But you're seeing basically three or four days where Nvidia has not been leading the charge, and the market's done very well. I think that continues throughout the second half of this year," Hogan explains. He expects the market to broaden this year in areas like energy, financials, utilities, and industrials.

He believes that second quarter GDP growth will be higher than expected, explaining, "I think we continue to see both the economy and earnings grow outside of consensus estimates into the end of the calendar year." He also expects the Federal Reserve to initiate an interest rate cut in September, adding, "Investors have really shown that given the choice between early and often rate cuts and better economic data and earnings, they choose the latter. And I think that's a very intuitive choice to be making. So I think market participants have certainly leaned into the direction of we'd rather the Fed not have to cut, but if they do cut, they can take their time doing it."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video Transcript

Let's welcome in Art Hogan.

He is the chief market strategist at B Riley Wealth.

Art is always good to see you.

Uh Let's start a kind of broader question.

Art.

You know, Julie was pointing out today, you look at the SSPXSP 500.

We're basically flat today.

Art, but what a run it's up about 15% so far this year.

Art I'm just interested.

Do you think that kind of, does that rally continue in the second half?

Art or, or no, you'd, you'd expected us to take kind of a breather here.

I think today is a perfect example and I think you guys set this up really well, I think it's a perfect example of a lot of folks being concerned that NVIDIA and arguably NVIDIA Microsoft and Apple were such a big part of the 15% that the S and P 500 is hire this year on a year to date basis.

And what would happen if one of those really fell out of bed now?

Not that 10% down on a stock that's up 140% year to date, uh minus that 10 is, is a big fall.

But you're seeing, you know, basically three or four days where NVIDIA has not been leading the charge and the market has done very well.

I think that continues throughout the second half of this year.

I think what we're going to see is as you, if you look at the cadence of earnings growth, the, the percentage that the other 497 stocks in the S and P 500 are going to be adding becomes much larger.

So I think you're going to see the market broaden out and likely see things like energy which we're seeing today.

Financials, which we're seeing today, utilities to a certain extent and likely industrials pick, you know, to your point, just pick up the baton a bit and start pulling their weight in terms of what happens in the back half of this year.

And I think that puts us in a healthier place.

I think the concentration at the top obviously has people nervous.

And if in fact, we work our way through the second quarter, energy porting season and see other sectors shine which we did in the first quarter, you know, we saw the sectors rather than technology actually do very well.

I think this market can really pick itself up in the back half and not necessarily need to be driven by tech and communication services.

Uh Art does that then imply also that you're pretty optimistic about growth, right?

Because obviously the tech increases that we've seen have been boosted by this A I narrative.

But for everything else to do, well, like it just kind of has to be a general growth narrative now.

Yeah, I, I would agree with that Juliet and I think when you look at the estimates for the second quarter GDP growth, uh according to the Atlanta Fed GDP now it's, it's north of 3%.

We'll get another revision to the first quarter later this week.

I suspect that goes higher, not lower.

I think we're going to be on pace to not necessarily have that sort of 3.5% GDP growth that we had in the back half of last year, but something like 2.5% which is certainly above mean and likely enough to be driving profits.

So if you look at the, again, if you look at the earnings estimates for the next three quarters, including the second quarter, they gradually work their way higher.

And as we all know that, you know, that we, the consensus tends to be a bit low.

So I think we continue to see both the economy and earnings grow out uh uh outside of consensus estimates uh into the end of the calendar year.

Another catalyst of potential CS are we're watching this week.

Uh P CE is on deck feds preferred inflation gauge.

What are you expecting to hear there are?

And what do you, what do you expect from the fed for, for the remainder of the year.

Now, I'll tell you this, the P CE is a little easier to calculate because by the time we get both the CP I and the PP I, we know what pieces of that goes into that, uh P CE reading.

So, um, as opposed to the 2.7 at the core level, we like to see that go down to 2.6.

And oddly enough, that's where the fed had actually factored us exiting 24.

So we'll be seeing a 2.6 print on the core likely this week that, that 2.6 is going to be close enough for government work for the, for the fed to actually feel comfortable enough in September for their first rate cut.

And I think that is likely going to be the start of feeling a bit better about where we are in the, in the monetary rate cycle.

We're, we're gonna be kind of last of the party as it as, as that goes because the, as we know the ECB already made that move, the Bank of Canada, the bank of England leaned into it and likely goes at their next beating.

So by the time September rolls around, we will likely see the fed cut for the first time and that probably takes a little pressure off the dollar to the dollar men unit are actually higher since the fed seems to be dragging their heels to the rate cut party.

I wanted to just push on one angle that, you know, the fed.

It, it seemed like for there was a moment in time there where it was just fed all day, every day, fed, fed, fed and it feels like it, maybe it's pulled back a little, a little bit on that.

I mean, am I imagine things are, or, or is the market, maybe, are investors coming around the idea that maybe, maybe that we're not as dependent as the fed as we thought we were six months ago or 12 months ago.

Oh, absolutely.

Such a good point.

Yeah.

So the fed pivoted, they leaned into being done with rate hikes at the end of last year and gradually.

And so we entered this year thinking maybe we get five or six rate cuts and they'd start as early as March and that dissipated pretty rapidly through the first quarter and yet the market continued to rally.

So investors have really shown that given the choice between early and often in rate cuts and better economic data and earnings, they choose the latter.

And I think that's a very intuitive choice to be making.

So I think market participants have certainly leaned into the direction of we'd rather the fed not have to cut.

But if they do cut, they can take their time doing.

And if September is the first time they do it, that's going to be great as opposed to where we were when we started this calendar year, which was assuming they were going to be cutting a whole lot more.

And the good news is they didn't have to because the economy continues to chug along at above mean pace.