The U.S. economy is on a new path toward growth thanks to an improved outlook on favorable policies for businesses and an overall uptick in optimism, strategist Doug Cote told CNBC on Monday.
"I'm bullish because we're on a new path. I call it the growth and reflation trade," Cote told "Squawk Box."
"We're already seeing the acceleration in corporate profits, broadening in manufacturing, the consumer continues to do well, developing economies around the world are doing well. Add to this some pro-growth economic policies and you have the reflation trade," the chief market strategist at Voya Investment Management said.
But it's not only pro-growth policies in the United States that investors should be watching, Cote said. "It's more important to talk about the whole portfolio," he said.
"Everyone's way too defensive. I think you need to broadly diversify your portfolio across global stocks and global fixed income," he said.
The biggest risk at this point is the U.S. dollar's strength, according to Cote. He said it must stabilize, and it will, as long as the Federal Reserve keeps a close eye on its volatility and President-elect Donald Trump's proposed tax and fiscal policies are implemented correctly.
"If you don't do spending cuts, if you don't get the budget under control, then these tax cuts are for naught. It won't be credible," Cote said. "You just can't do one side."
Appearing in the same interview, Mark Lehmann, president of JMP Securities and a fellow 2017 bull, told CNBC that he thought the postelection rally was just getting started.
"Obviously, we've seen a big ascend since the election, but I think it's in its first innings [and] it's still going to continue through the inauguration," Lehmann said.
Between wary investors still on the sidelines, capital moving into mutual funds, which diversify investors' portfolios, and people being generally underexposed to equities, there is ample room to run into 2017, Lehmann said.
"Couple that with an IPO market that'll be more fervent than we've seen this year, and I think you're setting up for a very nice start to 2017," he added.
Banks in particular will enjoy a great year next year, according to Lehmann. "I think you are going to see more capital flow into them, I think you're going to show a lot of foreign investors coming to the banks, and I do think the wind is at their backs," he said.
"When you see dividends, which we haven't seen for some of those stocks in a long time, I think you're going to see more people exposed to that sector," Lehmann said, referring to a company's payout to its shareholders.