Blackstone chief investment strategist Joseph Zidle believes it's time for investors to get cautious.
He predicts the Federal Reserve won't deliver expected multiple interest rate cuts in the coming months, and the disappointment will cause stocks to drop from their all-time highs.
"The march to 3,000 on the S&P 500 is not really being driven by earnings. It's not being driven by fundamentals, " Zidle told CNBC's "Futures Now " on Tuesday. "It's really being driven by liquidity on the hopes that the Fed is going to cut pretty aggressively."
According to Zidle, a cut isn't necessary at this juncture.
"Inflation is not nearly as weak as the market expects. A lot of the cuts that the market demands from the Fed were based on this really weak inflation expectation," he said. "Economic growth is slowing, but I think we're going to avoid a recession for a long time."
Despite Zidle's case that the economy doesn't need a rate cut, he agrees with consensus that the Fed will cut rates by 25 basis points next Wednesday as insurance. However, he splits with consensus over what happens beyond that meeting.
Right now, the fed funds futures market expects a 58% chance of a cut at the Fed's September meeting.
"The market is really terrible at predicting the future direction or path or magnitude of Fed actions," he said. "The market never really gets it right, and the Fed is not much better at predicting their own path either."
Once Wall Street realizes the Fed is putting the brakes on rate cuts, Zidle warns volatility will grip stocks.
"That's going to lead to a rerating of risk assets," he said.
Zidle's S&P 500 year-end forecast is 2,875 to 2,900, as much as a 4% dip from current levels.