Stocks are cheap but the market is still likely be lower at the end of the year says Byron Wien, vice chairman of Blackstone Advisory Partners.

Wien admitted on CNBC that he has probably been too cautious all year. But he says he's been worried and given the lack of growth, he remains cautious.

"The stock market is not expensive. The price-earnings ratio of the market is very reasonable right now," he argued. "I think the market has further to go on the downside."

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Wien did not suggest a crash, but he does believe many people will be surprised by the magnitude of the correction that lies ahead.

"Everybody says the market could correct 5 percent. The market always has a tendency to go farther than you think, up and down. And I think the correction could be greater than 5 percent," he explained.

He called attention to the Federal Reserve's balance sheet in 2008, which was $1 trillion.

"At $85 billion a month, they're going to put $1 trillion in this year. And they can't get the economy to grow at 2 percent in the first half," Wien noted.

"My concern about the second half is that the economy isn't building the kind of momentum that everybody thought," he added.

"When the stock market was doing well and it looked like the economy was going to pick up, there were a lot of people who thought economic growth was going to go to 3 percent real. I don't think that's likely. I think we could have another couple of quarters at 2 percent."

Although some people are very bullish with expectations of 3.5 percent in 2014, Wien questions the likelihood of that.

"I don't think the monetary expansion is having the impact [expected]," he stated.

"I think if you look at it, a significant portion of the money that the Fed has pumped into markets has gone into financial assets, pushing stocks up and keeping yields low."

Now, there is talk about the Fed tapering the flow of that money. And though no action has been taken, many market participants are seeing a red flag in the fact that interest rates are already rising.

Some people mistakenly believe rising rates are primarily the concern of bond investors, but MarketWatch's Brett Arends suggested stock investors best pay attention.

Rising interest rates are going to hit closed-end investment funds because many have "artificially goosed their yields with leverage." They borrowed money at short-term rates and invested it at long-term rates, he wrote in his column.

Meanwhile, in this environment of higher borrowing costs, U.S. businesses are also holding more debt than they were at the start of the crisis. Instead of the $11 trillion owed in 2007, companies now owe nearly $13 trillion.

"People forget that the infamous 1987 stock market crash followed a surge in bond rates," he explained.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now (Shocking)