Closely followed strategist Jim Paulsen said Monday that the market will continue to grind higher if we don't get inflation and interest rate pressures.
"We're kind of in a sweet spot here in this cycle where we're able to grow decently," said the chief investment strategist at Leuthold Group. "But we're not so far aggravating inflation or interest rate pressures."
"As long as we can continue to do that — I don't think we'll do it forever. But as long as we can continue, I think the market keeps going higher," he added in an interview on CNBC's "Squawk on the Street."
Every recovery in post-war history has ended in some semblance of overheat, Paulsen said. "I think eventually we're going to head to that," he said.
U.S. stocks were higher Monday, and the Dow Jones industrial average and S&P 500 hit new highs. Investors were looking to the Federal Reserve's two-day meeting on Tuesday and Wednesday and most market participants expect interest rates will remain unchanged.
Paulsen said from here on out he believes the international markets will outpace the U.S. "Most of those economies are in a younger part of their recovery," he said. "It's going to take longer for them to produce overheat pressures as much as we might have here in the United States."
Paulsen also recommended that investors look at "overheat sectors."
"I'd focus on the sectors that benefit from some sense of moving towards overheat. That'd be materials and energy stocks. The capital good stocks like industrials and technology," he said.