Don't bet on Trump rally ending in the new year, expert says

Conventional wisdom is the market rally may lose steam in the beginning of 2017, perhaps around President-elect Donald Trump's inauguration, but that consensus could be wrong, one expert told CNBC on Monday.

"What we've learned in the past year is that it has not paid to be with the consensus, so maybe this bull market surprises everyone in the beginning of the new year and continues moving," said Hank Smith, co-chief investment officer at Haverford.

The stock market has continually hit new highs after Trump's surprising victory in the Nov. 8 election. That has some calling for a sell-off around his inauguration, which is set for near the end of January.

Tourists pose for pictures with the famous bull sculpture near Wall Street in New York.
Michael Nagle | Bloomberg | Getty Images
Tourists pose for pictures with the famous bull sculpture near Wall Street in New York.

However, Smith is confident the bull market will continue, despite the fact that it has been going on so long.

"Finally coming into the eighth year of a bull market, we're starting to see animal spirits, we're starting to see investor confidence," he told "Closing Bell."

That's being seen in fund flows, with money finally coming into equity mutual funds and out of fixed income, Smith explained.

"We could be at the very beginning of a so-called great rotation that may take several years and be a tail wind for this bull market."

He sees a market that is based on earnings next year, resulting in "very healthy" high single-digit returns.

Sam Stovall, chief investment strategist at CFRA, also doesn't see an end to the bull market in sight.

"Even though only one other bull market since World War II has lasted this long, the things that would end up throwing us off track, meaning indicators for a recession, are just not there," he told "Closing Bell."

Typically there would be a 30 percent fall in housing starts, a 20 percent drop in consumer confidence and a six-month decline in leading economic indicators accompanying the beginning of a recession, he noted.

For those looking to get into the market, small caps may be the place to look, according to Tom Lydon, president of Global Trends Investments and editor of ETFTrends.com.

"In the last three years, small caps have underperformed large caps and as we know over time they do outperform," he said in an interview with "Closing Bell."

Investors are already pouring into small caps, with the iShares Russell 2000 ETF generating almost $10 billion in inflows in the past five weeks, he pointed out.

"I think that trend is going to continue during the pro-growth initiative that Trump's all about in 2017," Lydon said.

Steve Grasso, director of institutional sales at Stuart Frankel, would also stay with smaller companies, especially if the U.S. dollar remains strong.

"We're looking into that corporate tax reform, we're looking into personal tax reform. All these levels are coming in drastically, which is going to benefit the consumer and corporations that are domiciled inside the United States," Grasso, who is also a CNBC market analyst, said on "Closing Bell."

He also wouldn't worry about missing out on European stocks, noting that there is more than enough time to catch up.

"That trade is probably a couple of months away," he said.

U.S. stocks closed higher Monday in low volume trade, with the Dow Jones industrial average ending up 39.65 points to 19,883.06.

— CNBC's Evelyn Cheng contributed to this report.