Forget oil, Russia—Fed is 'big elephant': Paulsen

Refreshing global markets

The oil and ruble meltdowns may be grabbing the headlines for the recent swings in financial markets, but the real story is the Fed, market watcher James Paulsen told CNBC on Wednesday, ahead of the central bank's final policy statement of the year.

"It's been a puzzle why the [stock] market has come off this time. I still wonder if it's more tied to the Fed than people think," the chief investment strategist at Wells Capital Management said on "Squawk Box." With the expectation the Fed may start raising interest rates in the second half of next year, he added, "the big elephant in the room for 2015 will be the resetting of interest rates."

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The stock market has basically had three "minor corrections" since June, Paulsen said. "We're sitting here this morning about where we were at the end of June. We are starting the process of refreshing this bull market ... by basically going nowhere in the last six months and getting some minor gut checks along the way." The recent turmoil has also served to tamp down too high investor sentiment and lofty valuations.

After riding the stock bull market higher for years, Paulsen said last week on "Squawk Box" that he was going underweight U.S. stocks and forecasting a flat to negative 2015 for the market.

Some longtime bulls—Wharton's Jeremy Siegel and Fundstrat's Thomas Lee—have even sounded a bit more cautious, though both recently told CNBC they were still positive on stocks overall.

On Tuesday, Mark Grant at Southwest Securities painted a gloomier picture for stocks, saying he expects the Dow Jones Industrial Average to fall to 15,200 next year and expressed concern about further declines in oil.

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Dangers of chasing yield

Paulsen told CNBC he views the recent oil moves as a "one-off commodity collapse ... due to dollar strength and oversupply." He played down concerns in the market about weakening demand.

"I ultimately think we've going to find a bottom [in oil] somewhere and get a rally at least for a period of time," he said—adding he's puzzled over why falling oil prices and falling bond yields throughout the globe would be bad for stocks.

He argued that lower oil is providing a "massive fiscal stimulus with an 'oil tax cut' and a massive decline in bond yields," which may cause just the opposite next year: a pickup in economic growth.