Noted value investor Bob Olstein on Thursday said rising interest rates could provide a big boost for the stock market, because it signifies the economy is picking up steam.
"Earnings or free cash flow control valuations, and if the economy is turning, you have to get higher interest rates and I think there's going to be a slow, orderly march up in the next three years toward 4 percent on the 10-year," said Olstein, chairman and chief investment officer of Olstein Capital Management, on "Closing Bell." "If it doesn't happen, I'm concerned that means the economy is not growing and maybe there's more overvaluation here than they think."
The economy needs to pick up, too, to justify the wildly high earnings estimates for 2014, Olstein said. Lately, those lofty earnings expectations have been propped up by the Federal Reserve's $85 billion in monthly bond purchases—but he thinks the central bank will soon wind down its stimulus program.
It seems Olstein has a knack for gauging the market, too. His Olstein All Cap Value fund has gained roughly 30 percent year-to-date, outpacing the S&P 500 index at large.