Investors betting against the market have created an environment in which markets could take off even more than they already have under the right conditions, BMO Interest Rate Strategist Aaron Kohli told CNBC on Thursday.
Kohli told CNBC's "Squawk on the Street" that the market is currently "very short." By that, the strategist meant that investors are making bets on sectors or stocks whose profits could be hurt by what might occur in 2017, like rate hikes by the Federal Reserve.
"I think investors have broadly bought into that belief that rates are going up, and as a result, they've been willing to bet against the market quite easily, and that gives you the potential for a very strong rally if the right spark emerges," Kohli said.
Conversely, if there were to be a negative surprise in 2017 or the Trump administration is unable to make good on its economic promises, that could effect markets just as detrimentally on the other side, the strategist said.
"If there's any sort of hitch in delivering, if there's any sort of political issue, or if any of the other … extreme political projections that we've been talking about, either a trade war or any other sort of conflict, [start] to arise, I think you could see yields drop very quickly with very little stimulus," Kohli said.