×

Strategist Jim Paulsen makes case for why stocks are about to hit record highs

The S&P 500 should soon hit a record high due to a number of positive forces coming together, closely followed market watcher Jim Paulsen said Thursday, following the best two-day rally on Wall Street since March.

Economic growth, not only in the U.S. but around the world, is picking up in a "synchronized" fashion, and deflationary concerns are fading, the chief investment strategist at Wells Capital Management told CNBC's "Squawk Box."

"I think we're [also] past what everyone is perceiving as the worst earnings season. Earnings get a little better the rest of the year," he said.

If Federal Reserve policymakers do indeed hike interest rates in June or July, as they've signaled is a possibility, the stock market would view such a move as a vote of confidence in the U.S. economy, Paulsen said, adding a U.S. recession is unlikely in the next few years.

While near-term positive, he did say the S&P could pull back later this year — as inflation and wages start increasing faster, raising concerns over the pace of future Fed rate hikes.

As of Wednesday's close, the S&P index was within 2 percent of its all-time closing high of 2,130, set on May 21, 2015. Paulsen has a year-end target of 2,050, which would mean a flat 2016. The S&P fell 0.73 percent for all of last year.

"There's still a lot of pessimism," Paulsen said. "We're an eyelash away from all-time highs and there's a lot of people still in the bear market camp." If too many people shift to the bull camp, he said he might get more cautious.

Morning Squawk: CNBC's before the bell news roundup

Sign up to get Morning Squawk each weekday

Get this delivered to your inbox, and more info about about our products and service. Privacy Policy.
Please enter a valid email address