A Wall Street chief strategist says US stocks have 'favorable upside' from current levels — and could climb as much as 20% in a best-case scenario

• Stocks have upside from current levels even given the size and scope of the market rally from March lows, according to Leuthold Group.
• "If a new bull market has begun, despite the size and speed of this year's rally, there is still favorable upside potential over the next couple of years," James Paulsen, a Leuthold strategist, wrote in a Monday note.
• If the stock market continues to track the path of either the 1982 or the 2009 bull market, it would provide investors with a nearly 20% gain in the coming year, Paulsen said.
• Read more on Business Insider.

While the US stock market's rebound from March lows has given some investors the impression that it's "too much, too fast," it actually looks relatively normal compared with other new bull markets, according to Leuthold Group.

Today's rally "is certainly not a complete outlier, nor has it extended far beyond previous bull markets," James Paulsen, Leuthold's chief investment strategist, wrote in a Monday note.

Paulsen compared the current run with early bull markets from 1982, 1987, 2003, and 2009, which all followed bear-market declines of 30% or more. The current rally is "almost identical" to the 1982 and 2009 bull runs at this point and higher than the other two bull runs, he said.

"If a new bull market has begun, despite the size and speed of this year's rally, there is still favorable upside potential over the next couple of years," Paulsen said.

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Investor anxiety that the market is overextended or disconnected from the economic recovery has increased as stocks climb — they are now up 36% from March 23 lows. But Paulsen noted that in other bull markets that followed recessions, the S&P 500 began to climb before the economy recovered.

And potential risk and reward are exhibited by past bull markets, "which provided investors with additional healthy returns," Paulsen said.

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If the stock market continues to track the path of either the 1982 or the 2009 bull market, it would provide investors with a nearly 20% gain in the coming year, Paulsen said.

At worst, the stock market would be flat a year from now if it tracked the 1987 bull market, the note said. And if it matches the 2003 bull-market run, it would gain another 5%.

Paulsen cautioned that even if US stocks are in a bull market, investors should "anticipate frequent and sometimes substantial corrections along the way," noting that other bull markets also experienced setbacks and volatility.

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