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Fed 'dramatically' inflated these sectors: Expert

"Dramatically" high valuations in stocks and real estate will come down once the Fed abandons easy monetary policy, a private equity manager said Thursday.

"I do think as interest rates go up you're going to see a correction," Marc Utay, managing partner at Clarion Capital, told CNBC's "Power Lunch."

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Utay said he believes the central bank's bond-buying programs in the wake of the 2008 financial crisis pushed both equities and real estate to inflated levels. Wall Street has watched the Fed closely as a hike from near-zero interest rates looms.

Marc Utay, managing partner of Clarion Capital partners
Peter Foley | Bloomberg | Getty Images
Marc Utay, managing partner of Clarion Capital partners

He contended that loose policy has pushed stocks and real estate to levels that can't be sustained.

"The fact is it's driven those values up dramatically," said Utay, who manages $31 billion at Clarion.

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Investors now face a tough decision, he said. If they put money into stocks as major indexes sit just short of all-time highs, Fed changes could send multiples reeling in the long term, he said.

"We all know that eventually the Fed has to start to tighten and when they do that multiples are going to start to come down," Utay said.

He noted, however, that the central bank currently has limited flexibility as the dollar gains against major global currencies.

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