When the Federal Reserve hikes interest rates for the first time since 2006, stocks could suffer a major decline—not because of the move itself but what it signals, market watcher Komal Sri-Kumar said Tuesday.
"You've gone up a lot thanks to all the liquidity. If the Fed were to ever increase interest rates [I see] 20 percent-plus in terms of the downside," the president of Sri-Kumar Global Strategies told CNBC's "Squawk Box" in an interview. He also said he doubts whether the central bank will hike in September or December—the two months that many economists see as possibilities for the first move.
"A quarter point move alone doesn't do it. What causes it is the quarter point move is a precursor to what might happen," he added—citing concerns about rapid rate increases, despite assurances from the Fed that the trajectory of rates after the first move would be gradual.
The strategist is recommending that investors sell stocks and buy bonds, predicting a long-term move on the 10-year Treasury yield to 1.50 percent. In early Tuesday trading, the yield traded at 2.17 percent.