With oil prices stabilizing, U.S. stock indexes rebounding and volatility on the decline, things are looking a lot better for investors than they were just a couple weeks ago.

However, I doubt I’m alone in my sneaking suspicion that the recent sharp pullback was only a hint of what might be in store. Despite the current strength in stocks, some bearish risk factors are lurking. And these could converge relatively soon to precipitate a massive selloff that brings the S&P 500 down by 15%, 20% or maybe even more.

#-ad_banner-#Ironically, some of the things that could contribute to such an event are usually considered positive — like solid (if unspectacular) domestic growth. According to the International Monetary Fund, U.S. gross domestic product is on pace to climb 2.2% this year and should accelerate to 3.1% in 2015.

What’s more, the slowdown in China may not be severe enough to hinder growth for the United States and the rest of the world. In the third quarter, China’s GDP actually rose at an annualized rate of 7.3%, beating calls for 7.2% expansion. The second quarter’s 7.5% growth rate was strong, too.

Clearly, though, China is transitioning to slower growth after years of astounding expansion. But forecasts suggest the change will be gradual, generally giving markets and investors decent time to adapt. For instance, The Economist, which has been very accurate in its previous projections for China, sees the country maintaining about a 7% growth rate for the rest of the decade.

Another positive variable that could help bring down stocks: corporate profits.

These have been solid overall this earnings season, despite big disappointments by some major names like The Coca-Cola Co. (NYSE: KO), International Business Machines Corp. (NYSE: IBM) and The Boeing Co. (NYSE: BA). Still, 63% of the firms reporting so far have beaten estimates, and analysts project overall profit growth of 6.7% for the S&P 500 in the third quarter and 7.5% for the entire year.

Consensus estimates for S&P 500 profits to climb more than 12% in 2015 are also promising. Even if earnings came in a third lower, we’d still be looking at a very solid 8% gain next year.

Among the other data indicating a more robust domestic economy was a drop in jobless claims to a 14-year low of 264,000 in September. That month, production at factories, mines and utilities rose 1% — more than expected and the largest such gain in nearly two years, according to the Federal Reserve. We’ve also seen promising reports of things like gains in existing home sales, strong auto sales, rising nonresidential construction and shrinking federal budget deficits.

These and the other factors I’ve described are just the sorts of things that could push the market closer to a nasty selloff simply by forcing a major new policy change by the Federal Reserve. If the economy continues showing strength, then the central bank may discontinue its quantitative easing program this month or next. The alternative would be to hold off on tapering QE until year-end as James Bullard, the typically hawkish president of the St. Louis branch of the Fed, suggested a couple weeks ago.

Besides losing the ‘easy money’ injections that have juiced up returns for so long, the market may soon have to face the prospect of interest-rate increases (which are considered bad for corporate profits) for the first time in more than eight years. With the economy in much better shape, the Fed could surprise investors and announce rate hikes in the first or second quarter of 2015 — despite recent predictions that it’ll put off raising rates until 2016 because of Europe’s woes.

But even Europe may not provide an excuse to delay. With some economists and analysts now saying the European Central Bank will soon have no choice but to initiate more aggressive stimulus to prevent a recession, the region may actually end up being a tailwind for the United States. Indeed, Wells Capital Management’s chief investment strategist Jim Paulsen is bullish on Europe and recommends allocating new money to the region.

This is where the nasty pullback I mentioned comes in, and it seems to happen just about every time interest rates go up.

In fact, there was a correction or bear market in 13 of the 16 occasions since World War II that rate increases occurred, MarketWatch columnist Howard Gold recently reported. These pullbacks in stocks, which preceded rate hikes by about six months, typically resulted in a 16% drop in the S&P 500.

So if history’s an accurate guide, there’s an 88% chance of stocks dropping sharply next time around and the carnage could begin within a few months, maybe sooner. We might even be in the midst of it now if Bullard hadn’t stepped in with his dovish comments, stopping what seemed to be near-capitulation right in its tracks — the market was off nearly 3% at the time and gaining downward momentum.

Once the selling resumes, we may be fortunate to escape with only a 16% loss in the S&P. Based on how quickly the index and the riskiest types of stocks have rebounded, it seems investors are fast becoming as complacent as they were before the latest pullback. Thus, they could easily be blindsided, making a panic selloff that tanks the market 18%-to-20% or more particularly likely.

Then there’s Ebola, a risk factor the market has apparently forgotten for now since the chance of an outbreak in the developed world seems to have been squelched. But consider, the World Health Organization warned only a couple weeks ago of the potential for 10,000 new cases a week in Africa within a couple months. Whether or not the United States and other developed countries were directly affected, such a terrible disaster would greatly exacerbate any pullback in stocks.

Risks To Consider: The stock market is always risky, but it’s especially dangerous now. The greater your exposure, the greater your risk.

Action To Take –> Don’t be too eager to buy into the current rebound. Consider instead selling on market surges and accumulating what may be your best investment right now — cash. Even though the typical money market mutual fund yields an awful 0.4%, cash is safe, offering total protection from the type of carnage we’re at high risk for now. And once stocks have clearly bottomed, you’re well-positioned to find great bargains. In today’s market, I’m comfortable suggesting investors hold at least 20%-to-30% of their portfolios in cash.

For the non-cash portion of your portfolio, consider “Total Yield” investing. This means looking at companies that are the most shareholder-friendly, which has proven to weather recessions, downturns and bubbles better than the overall market — including the dot-com bubble and the 2008 crash. For more information about Total Yield investing, click here.