Markets aren't pricing in gains from a promised corporate tax cut by President Donald Trump, according to UBS managing director and head CIO of short-term investment opportunities, Vinay Pande.
And that could mean some stocks are set for outsized gains.
"I think that there are clear signs that this administration is looking to cut corporate taxes, if not this year, then later in the year, or early next year," Pande told CNBC's "Street Signs."
"Bottom up analysts have not forecasted any gains from tax cuts. And those gains could be substantial, whether they're this year or early next year, he said. "Every 5 percentage points net cut in the corporate tax rate translates into 4 percentage point increases in earnings per share growth. These are very big numbers, gigantic numbers."
In February, Trump promised to release details of a "phenomenal" tax plan in "two or three weeks." Investors, traders, and others are still waiting, wondering if Trump will make good on a campaign promise to slash corporate taxes from 35 percent to 15 percent.
In the meantime, a House Republican plan has detailed a 20 percent corporate tax and a border adjustment tax.
Pande said his analysis shows that there is substantial value in the U.S. and elsewhere in terms of equities, which he called under-owned, and that investors need to re-balance their portfolios.
"Investors are, I think, severely under-invested: Cash balances are very high, and as central banks make progress towards their inflation targets, if you're sitting in Europe or Japan with zero- or negative-yielding money markets, inflation is like termites eating your house," he argued.
Pande, who spends much of his time looking at short-term opportunities, said some investors may find themselves playing out a "Keynesian beauty contest," referring to economist John Maynard Keynes' theory about how people pick stocks they think other investors will later decide should be worth more.
"Perceptions matter just as much as — or sometimes more than — reality," he said.
Pande, who said the net gains following the financial crisis have really only come recently, said he sees the current bull run continuing.
"We have under performed and under grown for the last several years, so that's a bad reason. But good reasons include that there have not been the excesses that we saw pre-crisis — for example in credit spreads. Because you have not had excesses, the sort of short-circuiting of the growth cycle becomes less likely."