Dinan at Delivering Alpha: Fed leaving bull market room to run

The Federal Reserve's slow pace of interest rate tightening should leave the bull market room to run, York Capital Management founder Jamie Dinan said Wednesday.

Dinan noted that Fed Chair Janet Yellen has emphasized that even if the central bank begins raising its benchmark rate from near zero in September, it will only hike in 25-basis-point increments.

"Given where earnings yields are now relative to 10-year bond yields, there's a lot of space there that shouldn't derail this bull market," he told CNBC's "Squawk Box."

"There's an old saying, and I actually agree with it, that bull markets only end—particularly long bull markets like this—when you get a recession or you get aggressive tightening. It's really hard to see the recession right now."

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With GDP seen growing 2.4 percent and S&P earnings set for a 4 percent rise excluding energy, the U.S. economy and corporate environment look healthy, he said.

"I don't see the Fed aggressively raising rates, so this market should continue. You should be upbeat on U.S equities," he said.

Dinan made his comments at the Delivering Alpha conference, presented by CNBC and Institutional Investor magazine. York Capital Management manages $26 billion in assets across eight hedge fund strategies and six other investment strategies.

In a subsequent panel discuussion, Dinan said his "event-driven" strategy presents a number of opportunities.

He pointed specifically to mergers and acquisitions activity in health care, favoring Mylan and Perrigo.

Elsewhere, he said there are lots of opportunities in debt, including in Puerto Rico, which has been in the headlines lately for the latest chapter in its financial problems. Dinan said he doesn't necessarily favor the territory's general obligation bonds but rather opportunities in electric utilities and infrastructure generally.

European stocks are also looking "really attractive" at the moment, Dinan said.

He noted that the average price of equities in the Euro Stoxx 600 is trading at 23 times forward earnings, but the measure should drop down to 16 times next year.

"With interest rates being as low as they are, their central bank being your friend, I think risk is on in European equities," he said.

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Europe has emerged from the Greek debt crisis relatively unscathed, he said.

"The rest of Europe actually has not been damaged at all," he said. "Today the markets are not falling apart. Italy, Greece and Portugal [bond] spreads really didn't move that much over the last several weeks."

A widening of spreads from benchmark safe haven German bonds would indicate investors are demanding a higher premium to take on the risk of buying those countries' debt.

While negotiations over a third bailout for Greece began as an economic issue, it became one of solidarity for some European countries, Dinan said.

"The French and the Italians really led the way to say, 'This is Europe. We are a community, and we should behave like a community,' even though some of the northern countries said, 'No, it's just an economic partnership,'" he said.

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