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Strategist: Upward pressure on the Fed improves outlook for 2017

Turnaround quarter for earnings: Jim Paulsen

Upward pressure on the Fed, rising inflationary expectations in bonds and increased economic growth in the United States and abroad paint a better picture for 2017, strategist Jim Paulsen said Friday.

The chief investment strategist at Wells Capital Management also told CNBC's "Squawk Box" he is optimistic about earnings, and that could turn things around for the market.

"So far, the earnings reports we've had suggest that we'll probably get a positive year-on-year growth rate, the first in a while here on this earnings quarter," Paulsen said. "I think it's the quarter that will label the upward turn or the return of positive earnings momentum again looking forward into next year."

Paulsen predicted 2.5 percent or better growth for 2017 and a 10 percent improvement in the .

"We've got a healthy consumer yet, we've got a health job market, … capital goods reports are doing better, the manufacturing sector's been stabilizing, [and] I kind of think you might see better housing activity," Paulsen said.

Investment manager Richard Steinberg was more cautious. He said the market still faces several hurdles even if the Fed raises rates and energy prices stabilize.

"There's a lot of fatigue by the public and by the investment public both for the market and for the political environment that's keeping us … short term, treading water," the president and CIO of Steinberg Global Asset Management told "Squawk Box."

"If we stay in a low-growth environment, I think it's going to be hard to really move the ball forward in the market next year," Steinberg said.

His firm's target for the S&P 500 is about 2,300, but it's being cautious because of the uncertainty in the market.

"Firms like ours have raised some cash into this uncertainty, so we're around 15 percent cash," Steinberg said, adding that the firm has a hedge in one of its portfolios that can "spring" the cash into action in the case of market volatility.

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