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'Disappointing Earnings' Season Ahead: Pro

Third-quarter earnings season, which will kick off with Alcoa's report set for next Tuesday, is bringing out the inner bear in one noted bull.

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“Right now, we have to contend with what is likely going to be one of the most disappointing earnings seasons we’ve seen since the recovery began,” said David Bianco, the chief U.S. equity strategist at Deutsche Bank.

Although Bianco told CNBC’s “Squawk on the Street” he has remained bullish during some of the market’s darkest hours during the past couple of years, he is cautious about corporate profits in the recently ended period.

The quarter has seen deterioration in export and manufacturing activity in addition to a slowdown in investment spending caused by deceleration in Chinese construction activity and uncertainty surrounding the “fiscal cliff” and the European debt crisis, Bianco said.

Bianco has an “underweight” rating on the energy and industrials sectors and an “overweight” rating on the financials and technology sectors.

“Within technology, some of the preferred spots are things like software and services — Microsoft , IBM,” Bianco said.

“In the financials space, before we were talking about playing some of the improvement in housing with the regional banks,” he said. “Now we’re actually saying, 'Go buy names more like Goldman and Citi.'”

Despite weakness in global growth, Bianco sees additional upside for the S&P 500 and has a $1,475 year-end price target for the index. Key drivers for the S&P include the global economy, investment spending and exports, he said. Housing, on the other hand, is not as much of a key profit driver.

Bianco’s 12-month price target is slightly higher at $1,500. He stressed the importance of keeping taxation on equity returns low for market gains to continue.

“I think if the dividend rate goes up to the marginal income tax rate, this market will give back some of the rally, and it will limit the upside for full next year,” he said.

If global growth reaccelerates and dividend and capital gains remain no higher than 25 percent, Bianco said $1,600 could be a reasonable end-of-2013 price target.

-Written by's Katie Little. Follow her on Twitter @katie_little_.

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Disclosure information was not available for David Bianco.