A Wall Street chief strategist says US stocks have ‘considerable 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,” said wrote Leuthold strategist James Paulsen in a Monday note.
• If the stock market continues to track the path of either the 1982 or 2009 bull markets, it would provide investors with a nearly 20% gain in the coming year, according to Paulsen.
• Read more on Business Insider.

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

Today’s rally “is certainly not a complete outlier, nor has it extended far beyond previous bull markets,” wrote Leuthold Chief Investment Strategist James Paulsen 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 comparatively, 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,” said Paulsen.

Read more: Goldman Sachs has formulated a strategy that could triple the market's return within a year as volatility remains higher than normal - including 11 new stock picks for the months ahead

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.

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

At worst, the stock market would be flat a year from now if it tracked the 1987 bull market, according to the note. 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.