Specifically, he likes pro-cyclical mid-cap stocks in the United States, such as financials and technology.
"We've [also] been flirting with energy at this point because it looks a lot more interesting that it did a month, month and a half ago," Madigan added.
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The bank also favors small- and mid-cap stocks in Japan, but is hedging out the yen. It has also pulled back to a neutral position in Europe as it waits to see where the continent goes in terms of growth over the next 12 months.
While concern mounts over another recession hitting the eurozone, Madigan said he doesn't believe that will happen.
According to Madigan, "1.5 percent growth is the magic number for me because that's enough to sustain earnings, some top-line growth and a weaker euro will help. We're running at about 0.7 percent and that's a concern."
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He also wasn't too worried about the recent cut to the global growth forecast by the International Monetary Fund recently.
"We still expect global growth next year to be higher than global growth this year," Madigan noted.
Investors just need to remember to manage their expectations, he said. Earnings will continue to drive returns because, even with the recent pullback, the markets aren't cheap.
—CNBC's Jennet Chin contributed to this report.