The fourth quarter won't be anything like 2018, market bull Chris Harvey suggests

Wall Street bull blames market setback on 'people trading scared'

One of Wall Street's biggest bulls expects the fourth quarter will end better than it began.

Even though the Dow and S&P 500 gave back their entire gains from the third quarter, Wells Fargo Securities' Christopher Harvey isn't toning down his upbeat forecast on stocks.

He's confident Tuesday's slide isn't signaling a repeat last year's unprecedented drop.

"People are trading scared. They are all worried about [the] fourth quarter," the firm's head of equity strategy told CNBC's "Trading Nation" on Tuesday. "They say, 'I can't have fourth quarter '18 happen to me once again.' And so people are saying, 'Let me shoot first, and ask questions later.' So, you're getting a fair amount of volatility here."

2019's final quarter kicked off in a forgettable way after the latest monthly U.S. manufacturing purchasing managers' index compiled by the Institute for Supply Manufacturing hit a 10-year low.

"It was ugly," Harvey said. "The world economy is slowing down."

However, he suggests manufacturing activity will turn around once Washington and Beijing indicate they're making meaningful progress on trade talks.

"We think that we've peaked on trade and tariff fears," said Harvey. "There's enough pressure on both sides where they need to make some progress. ... [President] Trump has to be thinking about his election."

Not only does Harvey list trade emerging as a positive catalyst for stocks, he sees an easy Federal Reserve as a bullish driver. Last year at this time, the Fed was hiking interest rates.

"The Fed is not tightening. It's easing," he said.

Harvey's S&P 500 year-end price target is 3,088, a 5% gain from Tuesday's close, and it's 2% away from the index's all-time high hit on July 26.

"Credit spreads have been very tight. Issuance has been very strong," Harvey said. "The [jobless] claims numbers [are] still very well behaved. These are things you don't see before a recession."

— CNBC's Robert Hum contributed to this report.


Don't overly focus on the 'ugly' manufacturing number: market bull Chris Harvey