While the soaring dollar might have put a crimp on U.S. exports and American companies' earnings, it hasn't hurt stocks, with the S&P 500 index near its record high.
"The dollar is strong not because the U.S. economy is booming, but because Europe and Japan (the largest components of the Dollar Index) are intent on crashing their currencies," he writes in a commentary.
"For now, many still seem to believe this debasement and global currency war is a rising tide that lifts all boats, but should weakness in U.S. macro data and earnings continue, this belief may be tested."
GDP growth slumped to 2.2 percent in the fourth quarter from 5 percent in the third. And economists surveyed by The Wall Street Journal predict it will only reach 2.3 percent this quarter.
"With extreme volatility in currencies, commodities and bonds, it would seem to be only a matter of time before we witness a spillover to equities," Bilello says. "We can only imagine what volatility will ensue when [the Federal Reserve] actually raises rates."
Ray Dalio, the legendary founder of Bridgewater Associates, the world's largest hedge fund manager, also worries about the impact of Fed rate hikes on stocks.
Indeed, we could see a repeat of 1937, he and colleague Mark Dinner write in a note to investors obtained by the
Financial Times. In that year, the Fed tightened policy prematurely after the crash of 1929. This led to the Dow Jones Industrial Average falling by one-third in 1937 and continuing to decrease in 1938.
"We don't know — nor does the Fed know — exactly how much tightening will knock over the apple cart," the duo note.
"What we do hope the Fed knows, which we don't know, is how exactly it will fix things if it knocks it over. We hope that they know that before they make a move that could knock over the apple cart."
The Fed has kept its federal funds rate target at a record low since December 2008. Many economists expect the central bank to begin raising rates in September.