BlackRock’s Koesterich: Market could get ‘nasty’

BlackRock's Koesterich: Buy protection now

Russ Koesterich is the chief investment strategist at the world's largest asset manager. But that doesn't mean he's an unmitigated bull.

In fact, the BlackRock market master warns that a correction is likely ahead—and it's time to get some sort of protection.

"In the near term, I think you could keep pushing higher, which is why we've remained overweight stocks versus bonds. What investors may want to consider, though, is that even with all the good news, there's a lot of complacency in the market," Koesterich said on Thursday's "Futures Now." "It's hard to predict the timing, but we know that with volatility this low, there's not a lot of bad news discounted into the price of stocks."

So how bad could it get for the market?

"It doesn't have to be a permanent top, but it can be something that's a bit nasty," Koesterich said.

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As for what could cause this (admittedly long-awaited) correction, Koesterich fingers a pair of potential factors.

"I think there are two things in the near term that could lead to a correction, one of which is impossible to predict. If the geopolitical situation worsens in Ukraine or the Middle East in a way that impacts oil—to me, that's the key transmission mechanism—that can derail the rally. The second issue, which I think is going to come up closer to the fall, is when investors start to think about when the Fed's going to tighten rates, changing monetary conditions at the margin. That typically leads to higher volatility, but that may still be a few months away."

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For Koesterich, the ultimate takeaway is simple.

"We know that while valuations are reasonable, stocks are no longer cheap. So if they can use this low-volatility environment to get some longer-term insurance," such as by purchasing relatively inexpensive out-of-the-money put options, "that's a way to still be in the market and have some insurance for where and if that correction does happen."

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—By CNBC's Alex Rosenberg

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