Stocks should rally another 10% before hitting turbulence, Federated's Phil Orlando predicts

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Stocks could rally another 10% into spring: Federated

Federated Investors' Phil Orlando believes the S&P 500 could surge 10% and hit 3,500 by spring.

But the firm's chief equity market strategist warns the rally will likely sour by midyear.

Orlando isn't blaming fundamentals. Rather, he ties the trouble to uncertainty surrounding the 2020 presidential election.

"There's likely to be some increased volatility," he told CNBC's "Trading Nation" on Tuesday. "If you're looking at the year in total, I'd respectfully suggest that maybe it's a barbell-shaped year: a good start to the year, some volatility in the middle and we end the year in really good shape."

Orlando, a long-time bull who came into 2019 with a 3,100 S&P 500 price target, is known for vigorously defending his optimistic stance around last December's market meltdown. He called the bears "shameless" and tried to sooth investor fears.

"The heroic call was going from 2,350 last Christmas Eve to where we are now which is up 36% in less than a year," he said.

At this juncture, he believes the economy is showing signs of firing on all cylinders.

"The economy is actually starting to reaccelerate off of this trough that we put in over the last couple of months," said Orlando. "We've seen the downturn. Now, we're going to start to reaccelerate we think over the course of calendar 2020."

He lists good numbers on industrial production and capacity utilization. Orlando notes that the monthly Job Openings and Labor Turnover Survey, otherwise known as JOLTS, is starting to improve, and he highlights stronger than expected housing data.

"Getting a little bit more corporate earnings growth based upon a reacceleration of economic growth and still relatively benign price-to-earnings ratios, that gets us to that 3,500 level," Orlando said.

Despite his forecast for midyear turbulence, he expects the noise around the presidential election will resolve itself favorably with a business-friendly candidate winning. Orlando said it doesn't matter whether it's a Democrat or Republican.

"We [will] end up with good election results from a fiscal policy standpoint and we end the year on a high note," Orlando said.

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Stocks should rally another 10% before hitting trouble: Federated's Phil Orlando