The bull market in stocks has more room to run, and it could take the S&P 500 to a new high by the end of next year, one market veteran says.

That's the thesis of Phil Orlando, the chief equity strategist at Federated Hermes. Orlando sees the S&P 500 surging to 5,000 by the end of 2024, representing an upside of around 10% from the benchmark index's current levels.

"We think that stocks are going to grind higher. They've gone from 4100 to 4500. And we think that's a trend that's got legs," Orlando said in an interview with Bloomberg Surveillance on Monday.

His optimism comes largely because he thinks the Fed is done hiking interest rates. Central bankers have already raised rates 525 basis points over the last 20 months to lower inflation, a move that hammered stocks in 2022.

But inflation has cooled dramatically from its highs last summer. Prices rose just 3.2% year-per-year in October, lower than the expected 3.3% increase, the Consumer Price Index report showed last week. 

The case for the Fed to stop interest rate hikes is also supported by the recent surge in bond yields, with the yield on the 10-year US Treasury briefly surpassing 5% last month. Higher bond yields influence other interest rates in the economy, which have also helped tighten financial conditions.

"The bond market's done the heavy lifting for [the Fed] since the last Fed rate hike in July," Orlando said on Bloomberg. "That gives the Fed the luxury, in my view, to step back and say, you know what, we don't have to hike any more. We can just sit here on the sidelines for the next year and allow the gradual slowing of inflation to occur."

Markets are now pricing in an 81% chance the Fed could cut rates in the first half of next year, according to the CME FedWatch tool. 

Equities have been rallying in November as investors assess the more positive outlook for rates. The S&P 500 has climbed 7% over the past month, trading around 4,535 on Monday. That rally could even continue into 2025 and 2026, Orlando said, especially if the upcoming election cycle encourages more market-friendly business and fiscal policies.