The market is not only prepared for a potential U.K. exit from the European Union, but stocks can likely hit new highs once this week's referendum is over, Jim Paulsen, chief market strategist at Wells Capital Management, said Monday.
The Dow and S&P 500 were up more than 1 percent on Monday as the British remain in the EU camp closed the gap with the leave camp over the weekend. The Euro Stoxx 600 was up nearly 3.5 percent and on pace for its best day since August.
"Brexit reminds me a little bit of the fiscal cliff, kind of a self-inflicted wound that is probably outsized in terms of the fear it's generated," Paulsen told CNBC's "Squawk Box."
"I think we get beyond it, probably, and we get back more to fundamentals, and I think those are looking better and better," he said.
The current stock market rally is broad based, and low-yielding bond markets present little competition to stocks, he said. Paulsen also sees rising economic momentum in positive measures of economic surprises.
Further, he said, markets appear to be overcoming negative news and climbing a wall of worry. "Fear is back, and it's the backdrop for this bull, and I think it's going to take us to new highs," he said.
In another interview, John Silvia, Wells Fargo Securities chief economist, said the market has undergone a change in sentiment, but investors must remain cautious in light of the chance of increased volatility.
However, that would likely make the Federal Reserve wait longer to raise interest rates since a stronger dollar effectively tightens monetary policy, he said. The potential weakening of European and U.K. economic growth following a separation would likely bolster the case for the Fed to keep rates low and the European Central Bank to further ease them, according to Silvia.