He's no longer short the market, but that doesn't mean Doug Kass sees smooth sailing ahead.
The president of Seabreeze Partners Management has long warned that stocks were set to suffer a correction. He recently foresaw the S&P 500 breaking below 1,595 to swiftly hit 1,560. Now that Kass has seen the requisite move, he has shifted his net positioning from short to neutral, and predicts a range-bound market over the next several months.
But Kass is still worried that the market could encounter massive downside—and that most are unprepared for it.
"My greatest concern," Kass told CNBC's "Futures Now" on Tuesday "is that there is almost a universal view that stocks have limited risk from here."
But for Kass, that is far from the case, because of the massive spike in interest rates the market has already seen—and which is widely expected to continue.
"It is unclear to me how the U.S. economy is going to handle a rise in rates," Kass said. He then outlined three reasons why higher rates could pose a major problem to the economy and the stock market.