Bull market has more than a decade left, Federated Investors says

In human years, this bull market may be just a teenager.

According to Federated Investors portfolio manager Steve Chiavarone, the secular bull market is still in its early years. He estimates there's at least a decade left in it, citing a change in demographics.

"Millennials are entering the workforce, but their wages are going to be under pressure their whole career," he said on CNBC's "Trading Nation" on Friday. "They won't make enough money to pay down their debt, fund their life and fund retirement where there is no pension. So, they're going to need equities."

Chiavarone, who helps run the Federated Global Allocation Fund, said the current bull market is 4½ years old. He points out they typically last 15 to 20 years.

"The risk is not being in this market," he said.

His firm's S&P 500 year-end target for 2018 is 2,750, more than 6 percent higher than current levels. For 2019, the price target climbs to 3,000.

"We are probably frankly low on both of them," Chiavarone said. "Tax reform could push up the markets."

His favorite areas for investors are financials, energy, materials and industrials because they do well in a pro-growth environment.

Chiavarone doesn't like only U.S. stocks. He's also going abroad for gains.

"We really like Europe. For starters, Europe is one standard deviation cheaper than it normally is. There is positive economic growth in every country in the euro zone for the first time in memory. And you have a scenario where the banking system is finally starting to heal," he said.

But like a teenager, the market — particularly the U.S. — could go through a couple of turbulent years.

Chiavarone acknowledges a recession could be in the cards by 2020 or 2021 based on a more aggressive Federal Reserve policy to cope with inflation, adding it's a symptom of a "good, old-fashioned business cycle."

He doesn't expect the next downturn to be deep or prolonged and views it as an opportunity.

"Buy the recession," Chiavarone urged.

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