Futures Now

Stocks set for big, but short, rally of 5 to 10 percent: Analyst

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One Wall Street firm predicts stocks are about to surge, but it could be over within the blink of an eye.

Investors are anticipating the outcome of the June meeting of the Federal Open Market Committee, at a time when Federal Reserve policymakers have hinted at raising borrowing costs. On Friday, Fed Chair Janet Yellen said that an interest rate hike in the coming months would be appropriate, given the economic data.

Some Wall Street watchers think a rate increase could come as early as next month, which could help boost markets as the uncertainty dissipates.

"We could see some kind of rally that could last until the FOMC meeting in a few weeks," Kristina Hooper, head of U.S. capital markets research and strategy at Allianz Global Investors, recently told CNBC's "Futures Now. "The market seems to be coming to terms a bit more with the possibility of a Fed rate hike in June."

As a result, Hooper sees the index surging 5 to 10 percent as anxiety over the June Fed meeting dissipates. However, once the Fed makes its decision on rates, she believes uncertainty could climb again in anticipation of the central bank's next move.

"For so many years now, the Fed really has dominated and in many ways dictated risk and reward profiles for asset classes," said Hooper. "That doesn't appear to be going away anytime soon."

After the meeting, Hooper believes volatility will jump and the stock market could see big swings. In recent months, lack of clarity about the Fed's intentions has whipsawed markets, and Hooper said that dynamic could end any possible rallies just as quickly as they begin.

"We think it (volatility) can come from anywhere. Sellers are jittery across the board," she said. "There's also a desire on the part of investors, be they retail or institutional, to find decent returns and get some significant yield. So, there are certainly some factors which would drive investors into the stock market."

The CBOE Volatility Index has pulled back after briefly spiking earlier this year as the S&P hit its Feb. 11 lows. Since then, volatility has dropped by nearly 50 percent, and has been relatively flat over the past several weeks.

By the end of the year, Hooper predicts the S&P will return to current levels — even as bigger jumps surrounding stocks in both directions materialize.

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