While stocks continue to flirt with record highs, the markets aren’t expensive, given how low interest rates are, one strategist said. ‘Stocks are trading above their historical averages,’ said Kevin Kelly, chief investment officer at Recon Capital Partners. ‘But those averages were in 6-8 percent interest rate environments. Earnings now are worth more and can trade at a premium.' As the economy recovers, the Federal Reserve is looking for a window to hike rates, which many economists agree will be during the central bank’s September meeting. ‘At the end of 2016 short-term interest rates on a futures basis, are pegged at less than one percent, so interest rates are going to be low until at least the end of 2016,’ Kelly said. ‘We also have an election, so it’s a great time to get into sectors like technology and health care.’ Kelly is looking at InterContinental Hotels Group (IHG), which he said would be the best name for competitor Starwood Hotels Worldwide (HOT) to acquire, as the company’s recent move to hire strategic advisers has sparked merger speculation. He also is looking at British semiconductor company Arm Holdings (ARMH). ‘Profits grew 22 percent and its customers include Nvidia (NVDA) and Qualcomm (QCOM),’ he added. TheStreet's Scott Gamm speaks with Kelly.