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S&P Could Jump 20% If Europe Gets Its Act Together: Pro

In spite of last week's selloff in global stock markets on concerns over the future of the euro zone, one expert says the S&P 500, which closed the week down more than 4 percent, could rise 20 percent in the near-term if Europe takes decisive action to restore confidence.

New York Stock Exchange Traders
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New York Stock Exchange Traders

"All you need is the European Central Bank to come out and say or for Europe to say 'we will put a bottom to this, we will come with a program that will guarantee the debt of peripheral countries, and we are ready and willing to stand behind and make sure no one defaults," Kumar Palghat, Founder & Director of Kapstream, a global fixed income manager, told CNBC's "Cash Flow" on Monday.

"They need to create confidence in the system and once they do that bond yields will rise and equity market could go higher," he added.

Palghat said that the U.S. has a lot going for it right now. Americans are becoming more confident about their economy on the expectation that the Federal Reserve will not raise interest rates until late 2014. According to Palghat what is holding the U.S. back is the crisis across the Atlantic, with worries that Greece could be forced out of the euro zone.

But for now leaders, at the G8 summit hosted over the weekend by U.S. President Barack Obama, are of the view that Greece should remain in the single-currency bloc, and Palghat agrees, saying leaving the euro zone will not be easy.

"Leaving (the euro zone) is going to be a lot more difficult because (Greece's) new currency will decrease 30-40 percent, and that will cause its recession to turn into a depression," he said.

By CNBC’s Huang Junmin

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