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Hedge fund manager Paul Tudor Jones said the worst-case scenario is hitting investors as the Federal Reserve raises rates in an already-tightening market.

The founder and chief investment officer of Tudor Investments told CNBC the Fed typically cuts rates instead of hiking them when the economy slows or financial markets show the strain.

"We're in uncharted territory," he said. "Clearly you don't want to own bonds or stocks."

Instead of trying to make money in the current environment, Jones said "the most important thing" investors should do now is to preserve capital. 

His comments come before the Federal Reserve’s expected rates hike on Wednesday in its efforts to tackle 40-year-high inflation. Markets expect policymakers to hike rates by 50 basis points. He added isn’t the first to make these comments as Wall Street experts are also worried the Fed might send the economy into a recession with its aggressive tightening tactics as prices for goods climb. 

"If there was a strategy that I would want to employ right now if someone put a gun to my head, I'd say simple trend-following strategies," Jones said, referring to the practice of using algorithmic models to spot price trends.

ARK Invest CEO Cathie Wood has also warned of a financial crisis that could hit the US. 

“Equities and bonds seem to be warning the Fed that its policy measures could cause an economic and/or financial crisis: equities are swooning and the yield curve is nearly [in] negative territory,” Wood said.

“Another metric suggests that Fed policy already is too restrictive: the dollar,” Wood said. “Against expectations, the dollar has increased more than 13% from its lows last year, a real burden for emerging and other markets with dollar-denominated debt, and a powerful deflationary force.” She added.