Forget ‘dividend aristocrats’, look to global markets, strategist says

With global bond yields at all-time lows, dividend stocks have been the alternative for investors searching for any kind of kickback. Jim Paulsen, chief investment strategist at Wells Capital Management says global markets are heading for a rebound, and investors should look overseas instead of relying on "dividend aristocrats."

"There's a lot of market messages saying there's a global market revival," Paulsen told CNBC's "Squawk on the Street" Monday. "I would prepare for that by going offshore and overweighting those markets."

He pointed to developed markets up 15 to 20 percent off their lows, and emerging markets up 45 percent. Westpac's global data surprise index made its biggest and fastest move upwards since the recovery in March, Paulsen said.

He recommended diving into more cyclical areas rather than relying on U.S. dividend-yielding stocks.

"I think we might be en route to a global synchronized bounce at a time when a lot of people are concerned about growth weakening," Paulsen said.

In August, Paulsen said markets will mostly "march in place," but we may see another leg up, with the S&P breaking 2,200 or 2,250. But overall, he said this year "the better action will be abroad."

Jim Paulsen
Adam Jeffery | CNBC
Jim Paulsen

Katie Stockton, BTIG chief technical strategist, said improving sentiment in July was obvious in sector rotations out of defensive stocks.

"We've seen rotation into the likes of technology and industrials, out of staples, out of utilities," Stockton told CNBC Monday. "Just as you'd expect as the market's getting some momentum and getting some sentiment that it's improving behind it."

August trading though is kicking off against the backdrop of weaker-than-expected economic data.

Friday's gross domestic product reading showed a 1.2 percent growth rate in the second quarter versus economists' expectations of 2.6 percent. That combined with a downward revision to the first three months of the year for an average growth rate of 1 percent.

"It has raised pessimism in the shadow of Brexit," Paulsen said, referring to the GDP number. "I still think the economy is still growing in that 2 to 2.5 percent range."