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Pro Analysis

This bull market run is more than just a Trump trade, strategist says

The bull riding event at a rodeo in Arizona,
MyLoupe | UIG | Getty Images

The stock market rally since the U.S. presidential election, which has sent the S&P 500 to a record, is more fundamentally based than most investors suspect, according to strategist Jim Paulsen.

In a note to clients Monday, Paulsen, chief investment strategist at Wells Fargo Asset Management, said the foundation of the rally is more than just investors' optimism for the new administration to decrease regulation, increase fiscal spending and lower taxes.

In order to gauge the underpinning of the market, the strategist used a simple ratio which captures economic momentum by accounting for commodity prices and weekly jobless claims.

As shown in the chart below, Paulsen says a rise in the ratio (dotted line) signifies periods of improving economic and earnings growth, and has closely correlated with the market's trajectory since the year 2000.