The stock market won't be able to weather the one-two punch of rising bond yields and increasing concerns about a more aggressive path for Federal Reserve interest rate hikes, the chief strategist at Sandler O'Neill told CNBC on Tuesday.
"There's probably a correction coming in the [stock] market, maybe in the vicinity of 8 percent," because as yields and rates go higher equity values decline, Robert Albertson, who has decades of experience on Wall Street, said in a "Squawk Box" interview. "I kind of start from there when I'm looking for a place to invest in, certainly within the financial sector."
The 10-year Treasury yield on Tuesday resumed last week's march higher, rising above 3.25 percent in early trading and reaching fresh seven-year highs, before slipping. Bond trading was closed for Columbus Day on Monday.
Since the initial spike in yields last Wednesday, the S&P 500 dropped 1.4 percent as of Monday's close. The Dow Jones Industrial Average saw a similar decline since then. But the Nasdaq sank 3.6 percent over the same period.
Albertson said he takes Fed Chairman Jerome Powell at his word that short-term rates need to go much higher to reach so-called neutral, the level at which they're not restrictive or accommodative.
"We know they're not going to stop at 3 [percent]," said Albertson, who heads investment strategy at Sandler, a privately held investment firm that specializes in the financial services industry. Albertson argued the Fed might need to pump the brakes harder because of an economy with a "longer runway" and inflation that can't stay low for forever.
The current range for the central bank's federal funds rate, which banks charge each other for overnight lending, stands at 2 percent to 2.25 percent.
The Fed last month hiked that benchmark rate for the third time this year. Another 0.25 percent increase is expected in December.
Projections released after the September policy meeting indicated that central bankers were likely to take the fed funds rate to 3.4 percent, before pausing.
On Monday, however, BlackRock global fixed income CIO Rick Rieder told CNBC that he believes the run in bond yields is almost done. "I'm not that worried about interest rates killing off risk [assets] of any significant magnitude."
Rieder, who oversees about $1.85 trillion in bond assets for the world's largest money manager, also predicted the Fed was getting near the end of raising rates, with only one or two hikes in 2019. The markets, and even the central bank in its own forecasting, see a total of three rate hikes next year.