The Trump administration's market-friendly mix of policy initiatives could significantly boost U.S. 10-year Treasury yields within 2½ years, strategist Jason Trennert told CNBC on Friday.
The Strategas Research Partners chief investment strategist predicted on "Squawk Box" that while yields could flatten in the short term, they may reach 5 or 6 percent over the next few years.
"The Trump administration policy mix is highly reflationary, which means to me the yield curve is going to steepen, [and] you're going to see a lot more markets activity," Trennert said.
"Two-and-a-half percent 10-year Treasury yields, in my opinion ... they could go down in the short term, but it seems to me over the next year or two, they're going to revert back to something that's closer to nominal GDP, which by our likes could be something like 5 to 6 percent," he continued.
Trennert added that nominal GDP growth and 10-year Treasury yield movements are often correlated, which could justify the move.
If yields do move up, investors could switch their cash from equities into bonds, but with interest rates low, that migration could be long in the making, the strategist said.
"The good news is that you have the sweet spot. In the interim, interest rates aren't high enough to really attract people away from equities," he said. "And yet, it's going up because the economy is strengthening and earnings are strengthening."
If the Fed hikes interest rates in a slow and steady fashion, earnings will grow and markets will move higher in an orderly way, avoiding a rush out of equities and subsequent dip, Trennert said.
The strategist said he likes financial stocks, and would be wary of "the bond proxies that have worked so well over the last several years. ... In the utilities, telecom, [consumer] staples, all those things."