Stocks are attractive now as the war on inflation has already been won and Fed tightening may be nearing an end, says a Wall Street chief strategist

• Stocks look good now as the Federal Reserve appears close to ending its tightening, according to Jim Paulsen. 
• Inflation has already rolled over and will continue to decline, the Leuthold Group's chief investment strategist said.
• "Historically, peak inflations have been very good times to buy the stock market," Paulsen told CNBC. 

Wall Street strategist Jim Paulsen said the Federal Reserve's tightening campaign may be close to finished as inflation has already peaked, which historically has been a good time to buy stocks. 

In a CNBC interview Friday, he noted several factors that are having contractionary effects already, including slower monetary and fiscal growth, the stronger dollar, and rising bond yields.

"That stuff's working through the pipe and I think that's mainly why inflation's already rolled over, and why it's likely to continue to ease over the next year," said Paulsen, who is the Leuthold Group's chief investment strategist.

The consumer price index has cooled off over the summer, albeit at a slower pace than expected, with annual growth easing to 8.3% in August from 8.5% in July and 9.1% in June. But on Friday, the Fed's preferred inflation gauge — the core personal consumption expenditures price index — increased 4.9% in August from a year ago, up from 4.7% in July.

While Fed officials have said they are committed to bringing inflation down to their 2% target, Paulsen said their work is nearly done.

"I don't even know if the Fed has to do anything anymore," he said. "I think the war with inflation has probably been won, we just don't know it yet. Historically, peak inflations have been very good times to buy the stock market."

He noted the S&P 500's valuation is at relatively low levels, and that investor sentiment is very pessimistic, which is often seen by market contrarians as bullish for stocks.

Downbeat signals flashing throughout the economy indicate the Fed's tightening has gotten too extreme, Paulsen said, pointing to rising bond yields, falling commodity prices, and mortgages becoming increasingly unaffordable.  

"There's just too much that's out of balance," he said. "Something's gotta change. Maybe something breaks, maybe we get a bad economic report or a good inflation report. But I think we're getting really close to the end of Fed tightening. And a lot of other things are still pretty good. So I think we're going to have a pretty good year in the next year."