Economic growth has picked up as business activity thaws out from a frigid winter, investment strategist Jim Paulsen told CNBC on Monday, and that could push Wall Street past the recent volatility and into record highs.
Paulsen, chief investment strategist for Wells Capital Management, said he believes the U.S. economy is growing at a 4 percent clip in the second quarter of 2014. The Commerce Department will release GDP estimates for 2014's first quarter at the end of the month. Paulsen said the pickup in economic activity will boost the S&P 500 past an all-time high of 1,900 and toward 2,000 points.
"We're just getting the spring thaw, and we're going to get better numbers," Paulsen said on "Squawk on the Street." "If you look aggregately at the economy it's been awful good."
Economic conditions will hold more weight than the flood of earning reports hitting Wall Street this week, Paulsen said. The biggest factor coming out of earnings season will be forecasts, he added.
"The market is going to pay more attention to the economic reports out right on the ground, outside their windshield, than it is through the rearview mirror at an earnings season that everyone knows was highly distorted by the weather," Paulsen said.
The department is scheduled to release the advance second-quarter GDP estimate on July 30.
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Paulsen added that the boost stocks receive from the strengthening economy could turn into too much of good thing. The Federal Reserve could find itself fighting inflation as bond yields rise and as Wall Street deals with a "mini-overheat panic," he said.
"Before the year is out, we're going to bring the Fed back into the equation in a big way," Paulsen said. "What's going to do that is economic growth. ... There's a part of me that thinks we're stirring an overheat cocktail here."