A popular defensive play is making Wall Street's Art Hogan 'nervous'

Art Hogan is concerned that jitters over an economic slowdown are driving investors to a group with little potential for gains.

According to the National Securities chief market strategist, utilities are shaping up to be a poor choice as a defensive strategy.

"I get nervous when they trade at the multiples they're trading at right now," Hogan said Monday on CNBC's "Trading Nation."

Utilities are trading at 18.65 times earnings, just under its all-time high of 19.17 times earnings in 2017. The sector's dividend yield of 3.42 percent is considered historically low, too.

The Utilities Select Sector SPDR Fund, an ETF that tracks the group, has risen 11 percent this year and over the past 12 months by 20 percent versus 8 percent for the broader S&P 500 index.

That demand for utilities is worrisome to Hogan.

"Their dividend yield is actually too low for an entry point," he said. "I'd be careful with the valuations."

Yet he understands why many investors think it's necessary to run to safe havens like utilities. Hogan, who has been largely optimistic on stocks since the Great Recession, won't brand himself a bull right now. He contends there are too many risks, including the U.S.-China trade war, Brexit and the potential for slower economic data.

Hogan believes he has a better strategy for investors who want to protect their portfolios: technology.

"We've had periods of time when technology is defensive because of the cash flow. 2016 was that time again. And, I don't think that's a bad idea," Hogan said.

The tech sector is one of Hogan's top picks for 2019, along with health care and industrials. He has a 2,890 year-end price target on the S&P 500, a gain of 3 percent based on Monday's close.


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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 CNBC and 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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