The stock market could see another, deeper correction of 15% later this year: Strategist Jim Paulsen

Key Points
  • The recent gains on Wall Street won't last, Jim Paulsen says, predicting a possible 15 percent correction later this year.
  • Paulsen blames what he believes will be a 3 percent-plus yield on the 10-year Treasury.
  • The stock market was coming off five straight sessions of gains after briefly plunging into 10 percent correction territory earlier this month.
Stocks may see another big correction, says strategist Jim Paulsen

The recent gains on Wall Street won't last, closely followed strategist Jim Paulsen told CNBC on Friday, predicting a possible deeper 15 percent correction later this year.

The yield on the 10-year Treasury note will likely continue to move higher and advance more than 3 percent, thus renewing anxieties in the stock market, said Paulsen, chief investment strategist at The Leuthold Group.

The 10-year yield backed off four-year highs, trading around 2.86 percent early Friday.

"I think there's going to be more turbulence at some point this year," Paulsen told "Squawk Box." "I don't think we're going to have a permanent collapse of the stock market. I think we could have a 15 percent correction."

U.S. stocks have seen five straight days of gains, with the Dow Jones industrial average on pace for its best week since 2016 and the on pace for its best week since 2013.

Earlier this month, stocks sold off after the wage number in January's stronger-than-expected jobs report saw its biggest jump since the end of the Great Recession to an annualized rate of 2.9 percent, sparking inflation fears and concern that the Federal Reserve may increase the cost of borrowing money more aggressively to keep the economy from overheating. That started bond yields higher and stocks sharply lower. Wall Street bottomed out on Feb. 8, plunging into 10 percent correction territory.

Paulsen sees 2018 as an adjustment year for the stock market, a pause to allow earnings to grow into valuations. However, if the wage number in February's job report, set to be released on March 9, drops to about 2.5 percent, Paulsen contended, "I think the markets going to go higher."

Jonathan Golub, chief U.S. equity strategist at Credit Suisse, told CNBC on Friday that he expects another year double-digit stock market returns in 2018. He sees the S&P 500 reaching 3,000, or 12 percent, from where the index closed Dec. 29, 2017.

In a January note, Golub said given the market's recent strength, it is not surprising that investors have become increasingly uneasy with the rise in rates and the potential for future inflation.

"This is the best quarter of [earnings] beats as far back as we have history," Golub, a 20-year Wall Street veteran, said Friday on "Squawk Box." "The naysayers I think right now are just on the wrong side of this."