Analysts are betting on a comeback in inflation thanks to Trump's policy plans. That will boost expectations that interest rates will rise, which will then likely attract inflows into the dollar.
Because there is a universal opinion that the dollar is going to continue its climb, international and emerging markets have been slammed, said Paulsen, chief investment strategist for Wells Capital Management. Plus, materials and energy aren't doing as well as one would expect, he added.
However, Paulsen isn't convinced the dollar will continue to rally.
"I think the big surprise over the next 12 months is that the dollar is going to come down and not up, even though the Fed's raising rates, because inflationary expectations are accelerating and we're going to get to a point where the Fed is behind the curve and that will be a negative for the U.S. dollar," he said in an interview with "Power Lunch."
Therefore, he said, he'd sell some financials, which have had a big rally, and perhaps some small caps and industrials, and put the money into the international and emerging markets, as well as some materials and energy stocks.
—CNBC's Leslie Shaffer contributed to this report.