Stocks will charge higher as economic fears fade and bears give up, Bill Miller says

• Bill Miller expects a strong second-half showing from the US stock market.
• The Miller Value Partners founder sees a rosy economy and defeated bears driving stocks higher.

The stage is set for a strong second half for stocks, as economic fears dissipate and skeptical investors give up and join the crowd, Bill Miller says.

US inflation has plunged from over 9% last summer to about 3% in both June and July, and GDP growth was a solid 2.4% last quarter. The rosy backdrop has fueled hopes that the Federal Reserve will reverse its hikes to interest rates soon, and the economy might escape a recession.

"It's entirely possible that we're going to get back to a 2% inflation rate by the end of this year," Miller said during a recent live call hosted by Miller Value Partners.

"If we do without having a recession and with earnings being okay, that would give you a much, much higher justified valuation in the market than we're at right now," he added.

Miller noted that a robust first-half showing from stocks is usually followed by a similarly strong second half. The S&P 500 jumped by about 15% and the Nasdaq Composite surged 32% in the first six months of this year, but both indices have given up some of those gains in recent weeks.

The veteran fund manager predicted stocks would head higher, as bearish institutional investors swallow their doubts and pile into equities to catch up to their peers.

"What you could see here in the back half of the year is people getting pulled into the market," Miller said. "They're going to have to buy stocks just because they're so far behind."

The MVP founder and former manager of the Legg Mason Value Trust shared a trio of stock picks on the call. He predicted MicroStrategy would enjoy a "very strong tailwind" over the next couple of years due to its large stash of bitcoin. Miller has previously hailed the cryptocurrency as an "insurance policy against financial catastrophe."

Miller also touted subprime lender OneMain Financial's attractive valuation and large dividend yield. Moreover, he trumpeted apparel retailer Chico's stellar management, cheap valuation, and stock-buyback program.

The veteran fund manager is known for being an early investor in Amazon, losing about 90% of his personal fortune during the financial crisis, then attaining billionaire status in recent years thanks to his bets on the e-commerce titan and bitcoin.