Shark Tank investor Kevin O'Leary says it may be time to buy stocks as volatility returns

• Kevin O'Leary said volatility has returned to the stock market, adding it may be time to buy.
• The "Shark Tank" star addressed uncertainty in markets about how aggressive the Fed will be.

"Shark Tank" star and venture capitalist Kevin O'Leary said volatility has returned to markets, likely making it a good time to snap up stocks.

His comments to CNBC came after US stocks plunged Tuesday with the the Dow Jones Industrial Average losing more than 1,200 points to mark its worst day since June 2020. The sharp fall came after US inflation readings came in hotter-than-expected after August CPI rose 8.3%, higher than the anticipated 8.1%.

Tuesday's session marked the seventh one-day drop of 4% or more this year so far, as the Federal Reserve's tightening of monetary policy to fight inflation weighs on the broader stock market and causes investors to shun risk assets.

O'Leary however, suggests it's may be a good time to double down on cheap stocks after the slide.

"It's very disheartening to equity markets to lose close to 1,000 points in a matter of 40 minutes," O'Leary said.

"That means volatility is back. If you're an investor, maybe the best thing to do here is — since you can't guess the bottom — is to take opportunities on days like today and buy stocks that you think are attractive," he added.

O'Leary stressed a level of uncertainty in markets on how high the Fed is going hike the benchmark rate by to bring inflation down to its 2% target, as well as what the maximum end rate will be. The Fed funds rate is currently at a target range of 2.25%-2.50%.

"There's a bet going on in the market, you can see it as volatility. In fact, it may be significantly higher than 4%," he said, adding that central bankers are likely to approve another 75-basis-point increase at their September 20-21 meeting.

He added: "That level of uncertainty in terms of terminal rates, where the Fed will stop raising, is now officially an unknown. And so that's extremely problematic for the markets."

"When you have mixed signals, you don't have certainty, you have a hawkish Fed, you get correction. But if you're an investor like I am, you have to find stocks to put to work," he continued.

His approach to stocks, however, starkly contrasts growing investor pessimism on stocks. "Bond King" Jeff Gundlach believes it's time to get more bearish on US stocks as the risk of deflation next year grows.