The stock market is on solid footing right now, bolstered by the strength of corporate balance sheets, said Cantor Fitzgerald CEO Shawn Matthews Tuesday on "Squawk on the Street." He predicted that a new "wave" of M&A activity will follow in the near term as corporate cash is put to work.
"If you look at corporate balance sheets, they are in incredible shape right now," Matthews said. "That's really what is driving the earnings power that's going on."
"You'll start to see M&A activity pick up, which it already has. People will have to put cash to work, they're going to look for revenue growth opportunities," Matthews said. "You're going to have another wave where you'll see a significant M&A activity in the next year or two."
"People are looking for solid investments. You have a low interest rate environment and the stock market is the natural place to gravitate," he added.
Matthews thinks that a near-term pause in the rally is possible "somewhere in the near future" that could result in a several percent pullback. However, he said that "it's going to be a rotation in the equity space, with outsized returns in certain sectors of the equity market. People are looking to exit the fixed-income market. This is the formation of the cyclical market in the equity space."
"I certainly think the greatest opportunity is in the equity markets," Matthews said, citing financials and technology as interesting areas, although he also said that the "entire equity market is solid right now."