The Leuthold Group's Jim Paulsen expects the economic downturn from the coronavirus pandemic to reach epic proportions.
But he believes it's not another Great Depression.
"We had the roaring 20s, and during that period people got over their skies," the firm's chief investment strategist told CNBC's "Trading Nation" on Friday. "The depression started in some regards to correct the excesses that built the up over that period, and that has not happened at all today."
Paulsen, a long time bull, contends the economy was firing on all cylinders as the coronavirus started spreading in the United States.
"This recession, the one we're definitely in, was caused by a completely unique phenomenon. It was the first and only recession by proclamation," he added. "We just made a public statement that we're going to hit the off switch on the economy during this virus."
According to Paulsen, the government and Federal Reserve's massive economic stimulus policies to soften the to blow today were non-existent about 90 years ago.
"There was a move culturally in the country towards fiscal contraction and conservatism," he said. "I certainly think it's going to be a really deep, nasty correction, but I do not think it's a Great Depression."
He acknowledges the climb out of the free fall will be strenuous.
"If you decide to shut down the economy and have everyone stay home, you're going to have a complete collapse," said Paulsen.
Paulsen warned in early February the coronavirus outbreak could get really serious. He speculates it'll take a quarter or two for the U.S. to get its arms around the virus' spread — based on the fresh economic activity that's being seen again in China.
In the meantime, he said stocks could easily retest or even breach the low. However, Paulsen predicts stocks should be higher than current levels in the next 12 to 18 months.
"Probably, the greatest bulk of the damage has been done," he said. "The worst thing you can do is panic."
His best advice to investors: Stay diversified.
"I would use down days here to reduce my exposure to more defensive sectors like the utilities and staples and pharma and REITs — and look at maybe adding a little more cyclicality to the portfolio," Paulsen said.