Why markets will have year-end rally: Pros

Strong dollar catalyst for Q4: Pro
Strong dollar Q4 catalyst: Pro   

The end of the year is fast approaching, and with S&P 500 up about 8 percent since the Oct. 15 selloff, two pros think stocks are only going to continue to climb higher.

For Craig Columbus, CEO of First Allied Asset Management, the strong U.S. dollar is the catalyst for a year-end rally.

The dollar "corrected about 25 percent from 2002 to 2011 and we've only gained back about half of that during the recovery. I think there's more to go," he said in an interview with CNBC's "Power Lunch."

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Traders work on the floor of the New York Stock Exchange, Nov. 7, 2014.
Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange, Nov. 7, 2014.

While some may argue that a stronger dollar will hurt the market because of corporate overseas earnings, Columbus said there are several reasons it can ignite a rally.

A strong dollar, he said, makes dollar-denominated stocks more attractive for foreign investors. Plus, he thinks it makes the case for "a yen carry trade, as misguided as it may be long term, but that puts risk back in the market."

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On top of that, Columbus said, there will be a consumer tax cut just in time for holiday spending and lower inflation that will hold off an interest rate hike from the Federal Reserve.

Alan Zafran, senior managing director at First Republic Investment Management, believes seasonality plays a big part in the market's movements.

"Clearly you dip your toe in here because you sold in May and you're back in November to April. It's the best time of year to be in the markets," he told "Power Lunch."

There is also the election-factor, Zafran added, with history showing that the market is up 16 percent in the six months following midterm elections.

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So what should investors do?

"The economy is going to accelerate toward year-end, he said. "You want to be in sectors that are going to be sensitive to economic acceleration here as we enter the end of the year."

Zafran likes industrials and energy.

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