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Don't worry—it looks like S&P 500 has more gas in the tank, strategist says

This is a fundamental-based rally: Jim Paulsen

The , on four-straight record closes, may still have about 4 percent of gains left to run, closely followed market watcher Jim Paulsen told CNBC on Friday.

"This is a fundamental-based rally that has to do with economic growth picking up, maybe not only here in the United States but globally," the chief investment strategist at Wells Capital Management said on "Squawk Box."

"The corollary is investors are anticipating an upturn in earnings as well. I think that the broadness of this rally reflects that more and more companies are seeing positive earnings momentum," he added.

When he was on "Squawk Box" in May, Paulsen had correctly predicted the S&P 500 was poised to to make new highs.

If the S&P 500 were to post a fifth-straight record close Friday, it would be the first time that's happened in each day of a trading week since March 1998, according to S&P Dow Jones Indices. The S&P closed Thursday at 2,163.

Paulsen disagreed with BlackRock Chairman and CEO Larry Fink, who said on the program on Thursday that the stock market should not be at record highs. However, Fink put in a caveat, saying if earnings were to pick up, he might change his view.

Fink argued that the recent stock rally has been supported by institutional investors covering short positions, or bets that stocks would fall, and not individual investors feeling bullish.

But Paulsen said the rally could last a bit longer, and he predicted gains to as high as 2,250 on the S&P 500. Despite the specter of possible Federal Reserve interest rate hikes, the S&P could still finish the year around 2,100, he said.

Paulsen said one way to protect against a Fed rate hike is to move money overseas because many of the world's central banks are still deep into stimulus programs.

For investors looking to profit in the U.S. market, Paulsen advised rotating out of bond-like stocks that have been so popular for their yields. He said he would move to stocks that can benefit from cyclical moves in the economy.

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