Stocks to surge 8 percent to new records in final two months of year, market bull predicts

Bull says stocks will recoup correction losses, rally to new highs this year

Bill Stone is banking on a significant stock market turnaround this year.

With only two months left, the Avalon Advisors' co-chief investment officer predicts 2018's rally will be rekindled, sending stocks surging 8 percent or more.

"With very conservative numbers, I think you can get to 2,950 on the market []," Stone said Wednesday on CNBC's "Trading Nation." If it does, that would put the index above its all-time high of 2,940, hit on Sept. 20.

"The nice thing about this pullback — while it's scary, it has actually put some nice opportunity out in front of us again," he added.

Stone, whose firm has more than $7.7 billion in assets under management, says it's definitely not too late for a comeback of this size.

"The economy, we think while slowing, is certainly not slowing to a level that makes us nervous about earnings," he said. "We think the economy holds up and earnings hold up."

According to Stone, the uncertainty surrounding the Nov. 6 midterm elections is largely behind the three-week market slide. Once the elections are over, he believes there will be a calming effect on the market and investors will re-focus their attention on fundamentals.

"If you actually look back at the data since 1950, you have not had a year following the midterm elections that was negative," said Stone, citing data from Strategas Research. "On average, we've actually had a 15 percent return."

It would be a welcome gain after a painful month for investors. The S&P posted its worst monthly performance since September 2011, even with Tuesday and Wednesday's powerful rally.

Despite Stone's bullishness, he's not discounting Wall Street's growing concern that the Federal Reserve's interest rate hike policy may be too aggressive for Wall Street.

"The one thing to watch is the Fed," Stone said. "The market is looking at the possibility of a policy error there — that they'll tighten too hard."

Stocks just closed out a painful month, but top investment strategist sees a year-end rally