Market's record gains are a 'little bit deceiving,' but Wells Fargo sees it as a bullish sign

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Market's record gains are a 'little bit deceiving:' Wells Fargo's Chris Harvey

Wells Fargo Securities' Christopher Harvey predicts the market is heading further into record territory.

According to the firm's head of equity strategy, stocks have more room to run because the market hasn't fully priced in a Federal Reserve rate cut.

"The equity move is a little bit deceiving. We think people are really misconstruing it," the firm's head of equity strategy said last Thursday on CNBC's "Futures Now. " "Everyone is saying 'oh my goodness, we've had a great run. It's time to take profits.' But really, if you look at it, the market is flat since the last Fed meeting."

Even though there was no cut rate at its June meeting, policymakers communicated openness to easing this year. The policy change helped drive the Dow and to all-time highs. The indexes ended the week up more than two percent. The S&P is on pace for its best first half of the year in 22 years.

"The Fed has gotten more dovish. The [yield] curve is starting to steepen. Valuation is relatively attractive," Harvey said. "People are not positioned for it. People are positioned very, very defensively."

Harvey, who's one of Wall Street's biggest bulls, has an S&P 500 year-end target of 3,088 — 5% above current record levels. However, he didn't turn bullish until less than two months ago when he officially decided his 2,665 target for 2019 was too low.

"We thought [earnings] numbers would not be that great this year," he said. "What's happened in the interim is rates have come down."

Despite his positive market outlook, Harvey is cognizant the U.S. economy isn't where it was 12 months ago, and the U.S.-China trade war is pressuring growth.

But his bullish conviction isn't budging. According to Harvey, as long as the U.S.-China trade talks continue without escalating the war at this week's G20 summit, the stock market should grind higher.

"This is a long process. Just let's make some progress," Harvey said. "What we don't want to see is both parties say 'I'm taking my ball and going home.'"