Strategist: Fear not. 10% rebound still ahead

Published Mon, Jan 25 201611:48 AM EST

Even though the U.S. stock market is off to one of its worst starts ever, one Wall Street strategist is holding fast to his belief that we are still in a secular bull market. "For our part, we are not concerned yet. While volatility is likely to persist for the time being, we believe a strong rebound could be in store for U.S. stocks in the coming months based on trends in several indicators," BMO Capital Markets' Brian Belski wrote in a note to clients Friday. Here is why he believes the S & P 500 will rally 10 percent from Friday's close to his price target of 2,100 by the end of 2016. "We examined S & P 500 performance following its 20 worst months during the postwar era and found that, on average, performance tends to snap back rather sharply following such poor months," Belski said in the report. The average gain for the market after such dire months for the following six- and 12-month periods is a positive 7 percent and 15 percent, respectively, according to the chief investment strategist. BMO Capital Markets analyzed the historical data of the S & P 500 P/E to VIX index ratio, which measures how much investors are willing to pay for a given level of market risk. In times of rising market volatility, this indicator falls. In periods such as now when the ratio is one standard deviation below the average since 1950, the average gain for the S & P 500 is 13.7 percent in the following year, according to the firm. Read More Finding long-term value in the stock plunge "As the focus remains on commodities and emerging markets, we believe investors are largely ignoring what really drives the U.S. economy — the consumer, which has shown a tremendous amount of resilience despite market recent volatility." — Belski The strategist cites labor market conditions, home prices and other consumer data as reasons why he is confident the U.S. economy is still on solid footing. Historically since 1981 when an index of disposable income, nonfarm payrolls, jobless claims, consumer confidence, consumer credit, oil prices, home prices and stock prices is this positive, the average one-year return is 10.9 percent, according to BMO Capital Markets. Read More Pro Uncut: Full interview with Goldman's Gary Cohn

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Even though the U.S. stock market is off to one of its worst starts ever, one Wall Street strategist is holding fast to his belief that we are still in a secular bull market.

"For our part, we are not concerned yet. While volatility is likely to persist for the time being, we believe a strong rebound could be in store for U.S. stocks in the coming months based on trends in several indicators," BMO Capital Markets' Brian Belski wrote in a note to clients Friday.

Here is why he believes the will rally 10 percent from Friday's close to his price target of 2,100 by the end of 2016.