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Power Play: Expect a soft landing in China

Bejing, China
Dong Wenjie | Getty Images
Bejing, China

Stocks may be rallying today, but the Dow and S&P 500 are down about 8 percent since the beginning of the year on concerns that a slowdown in China will hurt global markets.

Federated Investors Equities CIO Steve Auth tells CNBC's "Power Lunch" on Thursday it will be a messy, but soft landing in China.

"China's government continues to hold a vast variety of weapons to moderate its economic readjustment and with it, its stock market," Auth said.

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However, Auth believes it will be difficult for the Chinese government to reassure the market near-term.

"Chinese policymakers have sullied what little credibility they had after August's blunders with their off-again, on-again, off-again approach to market circuit breakers and their very awkward attempts to devalue the Chinese yuan. This lost credibility will be very tough to win back," Auth said.

He sees more pain before we get some stability in the market.

"A more reasonable [S&P 500] year-end target for 2016 is probably about 2,150. We continue to have confidence the long-term move is higher, but a combination of a slower earnings recovery and a more skeptical investor base holding back multiples probably means that 2,500 is delayed until late in 2017," Auth said.

The Dow, S&P 500 and Nasdaq are up more than one percent during trading.