Can the S&P 500 gain 25% this year?
Posted February 6, 2019 3:16 p.m. EST
CNN — The stock market has the right ingredients for monster gains this year.
The S&P 500 could grow as much as 25%, Matt McCall, founder and president of Penn Financial Group, told CNN Business editor-at-large Richard Quest on the "Markets Now" live show Wednesday.
McCall didn't say when he expected the index to reach that point, and he admitted it's entirely possible the S&P won't end the year with that large of a gain.
But McCall said he sees a "Goldilocks" scenario for stocks to grow by a large margin: low interest rates, steady inflation and strong earnings growth in the first quarter of 2019.
He added that price-to-earnings ratios — or PE ratios, which compare a company's stock price with the amount of money it brings in — are below average. That means the stock market overall could be undervalued, McCall said.
"Ask yourself: Do I want to own stocks for the next 10 years?" he said. "If you say yes, then you need to be in now."
The S&P has grown about 9% so far in 2019, but it lost 5.3% over the course of 2018.
McCall said he thinks the biggest threat to continued market gains in 2019 comes from the US political climate. But he thinks the trade standoff between the United States and China will come to an end soon, which would be a major boon for stocks in both countries.
Matthew Ceslock, an equity trader with Virtu Financial, agreed with that prediction.
"If we can solve this China tariff war by the end of this month, that's going to provide a big, big tailwind to this market," he said.
Top negotiators for the Trump administration are due to arrive in Beijing next week to continue talks ahead of a March deadline. Both sides are looking to reach a permanent deal to end a months-long trade standoff.
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