"The shock could come out of a faster rise in interest rates on the day it happens because the economy's getting better," he said, adding that geopolitical risks also lie in Syria, Crimea and Iraq. "There's a lot that can go wrong, but there's a lot that go right."
With that in mind, Gabelli selected three "I" stocks he's holding:
"Interpublic, run by Michael Roth, who's done a terrific job," he said. "Consolidation, because of economics, in the advertising business."
Gabelli's second pick was International Game Technology—"not as well run and a company that has some suitors looking at it, good cash flow," he said. "They hired a banker to look at alternatives, which means somebody was knocking on their door, which is not inappropriate, given the lackluster focus on the management team."
Lastly, he liked a longtime holding of his, IFF.
"And then a company that has a substitute in what I call the health-and-wellness theme, and that is a substitute for salt and sugar. Hard to get details, and it's a company that I liked, and we've owned it for a long time, International Flavors and Fragrances. They're going through a management change. You're talking about a company with 80 million shares of $100 stock, $5 in earnings."
—By CNBC's Bruno J. Navarro