Emerging markets instability won't strike US stocks, PNC top market watcher says

Investors may want to spend less time worrying about the emerging markets ruining the U.S. stock market rally.

According to PNC Financial's Jeffrey Mills, Wall Street has been overplaying the risk of the asset class wrecking this year's record run in the U.S., because bear markets aren't normally contagious.

"There is historical precedent for U.S. markets decoupling from troubled EM [emerging markets.] If you go back to the mid-90s, for example, there was an EM rout of over 30 percent," the firm's co-chief investment strategist said on CNBC's "Futures Now" last week.

"The S&P 500 held in fine and actually rallied really dramatically into 1995," he added. "There is certainly no rule that says our markets need to react to what's going on in EM."

His thoughts came as the troubled MSCI Emerging Markets Index registered its first positive week in three, an encouraging sign that some of the pain may be abating. Still, the index is down almost 8 percent over the past 12 week on instability in countries such as Turkey, Brazil and China.

Meanwhile, the S&P 500 is trading around all-time highs. For the week, the S&P, Dow and Nasdaq closed higher.

"The market can still rally into the end of the year," Mills said. "As long as we can maintain multiples around where they are today, I think we can rally into the 3000 range. We don't typically give out a specific target, but I would be positive here especially as we get through the midterm elections."

However, he expects a market rally post-midterms regardless of the outcome.

"Once you get passed that uncertainty, the market knows the cards it's been dealt, and then it moves forward," he said.

Plus, Mills contended earnings forecasts will remain intact through next year, and that bodes well for stock market gains no matter what's going on overseas.

"We haven't see any degradation in those forecasts. And for us, that's positive for the markets and positive for the overall economy," Mills said.

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