Stock are still near record highs, despite recent volatility. In the past 30 days, the S&P 500 Index and the Dow Jones Industrial Average added only about 1 percent to their now 16 percent gains for the year to date.
"We will find ourselves at 1,700 [on the S&P] at different times the rest of this year," he continued. "If we're around the 1,700 level, I'd be a little more cautious about committing capital unless you are just woefully underallocated" in stocks.
"I think what we really haven't had in this entire bull run [in stocks] of the last four years is real pain introduced into the bond market," Paulsen observed.
In the past two months, the yield on the 10-year Treasury has spiked 22 percent to around 2.2 percent.
"The rest of this year, the 10-year yield ends up closer to 3 percent than 2" percent, Paulsen said. "If it does that, you really create not just underperformance by bondholders, [but] real losses."
He also said he believes that trend will spill over to "bondlike stocks … high-dividend payers, not just utility stocks, which we're seeing getting hammered as the bond yields have moved up the last month."
"It might be the [S&P 500] Dividend Aristocrats Index that could get hit pretty hard," he concluded.
The index tracks blue-chip companies with a track record of increasing dividends every year for at least 25 consecutive years.
—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.