The world has largely focused on the debt crisis in Greece and China's stock crash, but interest rate moves in the United States and Germany are among the most fascinating developments in the market, James Paulsen, Wells Capital Management chief investment strategist, said Monday.
Paulsen said he believes the Federal Reserve will begin raising interest rates soon and the 10-year Treasury yield will approach 3 percent, in which case, it may not be "clear sailing" for markets. Late morning on Monday, it was at 2.43 percent.
"They have come right back up to the highs they were at before Greece turmoil started to accelerate," he told CNBC's "Squawk on the Street." "Ultimately this is going to come back to when rates are going to start to rise, and we'll have to wait and see how Wall Street handles that."
U.S. Treasury prices fell Monday, pushing yields higher, after the bailout deal between Greece and its creditors dented the appeal of safe-haven bonds. Safe-haven bonds, which have benefited from the Greek crisis, sold off in both Europe and the U.S.
The stock market is still vulnerable as sentiment remains too calm and valuations too high ahead of rate tightening, but investors keeping buying the dips, he added.
"There's a lot of money that shows up on every dip," he said. "I think that says something about how calm and confident people have become about future here, maybe for the first time in this recovery."