Art Hogan, Chief Market Strategist at National, joins yahoo Finance’s Editor-in-Chief Andy Serwer, Alexis Christoforous, Brian Sozzi and Jared Blikre to discuss the latest market action.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to welcome Art Hogan, Chief Market Strategist at National. Art, always good to see you. Thanks for being with us. Some on Wall Street are suggesting that perhaps, the worst is behind us-- dare we even say that. We did reach a bottom. What are your thoughts on that?

ART HOGAN: Yeah, I think the bottom needs a process, and I think we're in the middle of that process. I think what we have to look at clearly is, A, we've got a lot of damage to the major indices in a very short period of time. We got a bit of a relief rally last week. And significant, what we've gotten in was three legs of the policy stool put together at the same time-- monetary policy in spades, fiscal policy passed, locked, and loaded, and health care policy.

But what remains to be seen is, how many cases will we discover in the United States? And when that hits a crescendo, I think markets will be out in front of that. But we still need to get more bad news out. And a lot of that's going to come in terms of economic data, especially this week.

BRIAN SOZZI: Art, do you think the market understands how bad the economic data will be in April and May?

ART HOGAN: Yeah, that's a great question. We had a pretty good precursor to that with the jobless claims number at a historic high last week. We-- [AUDIO OUT] None of our payroll number will largely be ignored, because that only captured a couple of weeks of March, right? So what we have to think about is, the jobless claims right now are more important than anything in terms of economic data. But these numbers will decline. We clearly have frozen this economy to stop this virus. And the numbers are going to be bad. I think the market understands that, but we'll wait and see what kind of reaction we get.

ALEXIS CHRISTOFOROUS: Andy Serwer, our Editor-in-Chief, want to bring you into this conversation. So Andy, we heard over the weekend the president is extending social distancing for the country at least until April 30. What is that going to mean for the small businesses, many of whom just have a couple of weeks' cash on hand? We know that those Small Business Association loans should be available as of this Friday. But timing is of the essence here, right?

ANDY SERWER: Yeah, it really looks like April, Alexis, is going to be code red for the US economy, and particularly for those small businesses that you're talking about. And there is basically going to be no business. I mean, there hasn't been any business for the past couple of weeks. Of course, it depends on what part of the country you're talking about. Some places are relatively unscathed. Places like New York City, obviously, are in pretty dire circumstances.

The money needs to get out. I think the real test is going to be at the end of the month, when these small companies have bills to pay. And are they going to have the cash to do it? Are their creditors going to afford them the ability to spend credit, which I think they have to do? And so, I think at that point, we're going to start to look over the horizon a little bit, like Art was saying, and thinking about when can we get back to normal. But you know, April is going to be the toughest month, I think, for the US economy.

BRIAN SOZZI: Andy, I was reading your newsletter over the weekend. And one sentence that stood out to me-- you know that it's likely the government plays an outsized role in all our lives, even after the coronavirus passes. What do you think that means for stocks and even the economy?

ANDY SERWER: Well, you know, Brian, it runs counter to everything we've really learned and thought about government going back to the days of Ronald Reagan in 1980 even. So this is a big change-- having the government plays such a large part in our lives. And it goes against, really, the GOP and Donald Trump.

But you know, right now, they're the lender of last resort. And they're the ones that the economy and the stock market not only here, but globally, is going to be looking to to take the lead in terms of a financial underpinning. You know, Art talked about, obviously we've got to have fiscal policy with monetary policy.

So that's all important. But really, all eyes are on Washington. And you know, it's incumbent upon not only the White House but Congress as well to show that they have a constructive approach to address this crisis and to be able to execute quickly and efficiently.

ALEXIS CHRISTOFOROUS: You know, Art, do you think that enough has changed fundamentally and technically in this market to justify adding a little selective risk right now?

ART HOGAN: Yeah, that's such a great question. We get that all the time. So I think about that advice three ways. First and foremost, if you're a long-term investor, you've got a 20-year horizon. You probably don't want to change your game plan much. But what you do need to do is rebalance, because you are very out-of-whack in a 60-40 portfolio in terms of fixed income and equity. So rebalancing makes a great deal of sense.

But if you're that investor that is starting to look at things that you think are washed out, we really recommend those names-- if you going to start selectively getting back into this market-- those names that have outperformed the market on the way down. It's a lot of the household names that we talk about all the time, in terms of Amazon and Google and Netflix and JP Morgan.

There's a reason they've outperformed on the way down, and they're likely to do better on the way back up. We'd rather you do that than start having some of the risky names, like the airlines, the restaurants, the casinos that have really been beaten up, because I think it's going to be a long time before we see any recovery-- [AUDIO OUT] --future.

BRIAN SOZZI: You know, Art, what do you make-- let's say a year from now, we're obviously by then, or hopefully, beyond the worst of the coronavirus. But even still, a lot of companies now-- they're giving workers wages to deal with the situation. They're having more costs come into their business. What do you think that means for stocks in that-- what you think it means for stocks in that post-coronavirus world?

ART HOGAN: Well, that depends when that post-coronavirus world starts to kick in, right? So we need to find therapeutic responses. We need to find a peak the curve of-- [AUDIO OUT] --discovery. And then, we need people to get back to business. [AUDIO OUT] --getting back, and that means a lot of things.

But recovery happening in the second half of this year, where business slowly gets going again-- I think, at least heading into 2021, are going to look very attractive. I think it's going to be one of those things where, yeah, the S&P 500 for 2020 will be down year-over-year. But earnings for 2021 are going to look significantly better as we slowly get back into business.

So my guess is, if we're down to about 10% to 15% on the S&P 500 earnings in 2020, that's very well baked-in right now. But I don't think that that sort of 15% to 20% profit that we see in the year in 2021 is baked-in. So I think it's just a function of duration-- how long before we start getting back to work.

ALEXIS CHRISTOFOROUS: Andy, I want to talk about oil. Crude oil at a 17-year low-- some on the street saying that we could see West Texas go negative. What is the effect going to be on consumers when we do come out of this? Isn't it actually good news that oil is so low, because things like gas, when we're able to get out of our houses and use our cars again, is going to be so low?

ANDY SERWER: Yeah, Alexis-- Goldman Sachs putting out a note this morning, talking about how this is likely going to be a permanent change-- as permanent as anything can be in the markets-- in terms of oil prices, a very pessimistic note for the oil business. And you know, the other point that you make, though, about how much of a positive or negative is this for the economy-- we know now that we're much more of an oil-producing nation than we were 15 years ago. So it's not as just net positive as it used to be.

However, you're hearing reports about $0.99-per-gallon gasoline in Kentucky right now. And so, the price of gas is just going to be dirt cheap probably for at least the intermediate period. And that is going to be a positive, not only for consumers but for truckers and for other modes of transportation and consumers of petrochemicals.

So you know, yeah, maybe that's going to be a real positive. Now, of course, it is going to be a negative for Texas and Oklahoma and the Dakotas and Colorado and other oil-producing states. California produces a lot of oil as well. So you know, there's going to be some negative that goes along with that positive.

ALEXIS CHRISTOFOROUS: Hey, Art, I'd like to get your thoughts on oil as well. And what's going to happen to these smaller energy producers that just are not going to be able to survive? What happens when they start to fold, they start to lay off employees?

ART HOGAN: Yeah, Andy brings up a good point. So yes, what we have to balance off here is that positive effect for the consumer-- anybody that uses energy product, whether it's on logistics, transportation-- you know, the things that we buy and the things that we have shipped. But the net benefit-- and I think you bring up a really good point-- the negative is, we become more dependent as a country on energy being a large part of our CapEx spending. And that's going to disappear quickly, unless and until we-- [AUDIO OUT] --Saudi Arabia-- --about to be in a long-term, mutually destructive price war.

And there's a greater ability, in my mind, that both Saudi Arabia and Russia get back together and at least come to an agreement on some separable level on production cuts. This really started after the OPE meeting. Now, obviously, global demand is down. OPEC wanted to cut 1 and 1/2 million barrels a day. About one million would come from OPEC with large-- [AUDIO OUT].

--in at 15 and say, we've overdone it. We've overshot it. We didn't think this was going to happen. Flooding the market is not helping anybody. And we made some production cuts, and we had to pullback. I think it will be extremely helpful right now. But there's a lot of debt-laden, small A&P and oilfield service companies in the United States that are on the verge of going out of business. We're either going to see a lot of them merged into larger companies or just disappear off the face of the planet.

BRIAN SOZZI: You know, Art, switching gears from oil to health care, I'm looking at some of the moves here-- looking at Abbott Labs, Johnson & Johnson-- some positive news for both those companies on the coronavirus front. Is big-cap health care one of the best sectors to be in right now?

ART HOGAN: You know, I think it's amazing. Our health care infrastructure has come so far from the days of SARS. 17 years ago, we would never have gotten the DNA sequencing of this coronavirus in two weeks. And we'd never have dozens of companies working on both therapeutics and vaccines at the same time.

I think the most exciting stuff that's going on right now-- and Abbott had that announcement over the weekend, in terms of testing-- [AUDIO OUT] Two levels of testing-- if you want to find out if you have this right now, we also need that test that tells us if you had it before. [AUDIO OUT] --gene, or B, have you already gone through this process? Do we know what portion of the population has been immunized?

When I think about large-cap health care right now, we really focus on looking at the biotech as a basket. And we view the IBD, which is the ETF that looks at that biotech in general-- I think Gilead and Regeneron are doing amazing things. Obviously, Johnson & Johnson-- Johnson & Johnson has been working out a vaccine.

They're on the fast track. But understand that things are going take a long period of time. You need to do rigorous testing. That's probably a year and a half out. What's happening in the here and now-- our amazing new fast test and obviously a bunch of different ways to attack this on a theraputic level.

ALEXIS CHRISTOFOROUS: Yeah, Henry Schein supposedly out with a new test any day now-- a 15-minute coronavirus test. Art Hogan, Chief Market Strategist at National, thanks so much for being with us.