Watch out! You’ll get 'ripped' if you’re in the wrong sector, Wall Street veteran Art Hogan warns

A veteran Wall Street forecaster is out with a warning, and it has nothing to do with a broad-based stock market sell-off.

Wunderlich Securities' Art Hogan is arguing you'll "get your face ripped off if you're in the wrong sector."

The issue has to do with the lengthy low-yield environment.

He says the impact would be costly to scores of investors exposed to two particular defensive areas known for paying dividends.

"Chasing yield has pushed a lot of people into utilities and staples," said the firm's chief market strategist on Friday's "Trading Nation." "If we have any lift at all in yield on the 10-year [Treasury] ... that sector could give back three years of dividends in about two weeks."

In the past five years, consumer staples have soared 54 percent while utilities are up 51 percent.

Hogan isn't downbeat on the entire market.

He's urging investors to consider financials, which are down nearly 5 percent over the past four weeks, as an alternative.

The space has been under pressure due to falling bond yields. Plus, Hurricane Harvey and now Irma have been challenging the sector.

"The charts look terrible, and that's exactly why you may want to start thinking about this. My guess is the yield on the 10-year is going to go to two and a half percent before it goes to one and a half," Hogan said.

"I don't think it would take very much — the right commentary out of [European Central Bank President Mario] Draghi, the right commentary out of this Fed meeting in September about balance-sheet normalization, and that group could pop pretty quick. It's very oversold."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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