U.S. equities are likely to rise over the next year, but markets need time to repair after last month's selloff and could face tests, said Bob Doll, chief equity strategist at Nuveen Asset Management.
"When you hit someone over the head with a baseball bat, as we did with the market, you don't get expect them to get up the next morning and act like life is normal," Doll told CNBC's "Squawk Box" on Thursday.
On Wednesday, the Dow industrials, Dow transports, Dow utilities and S&P 500 climbed to record closing highs. Doll said the S&P, which ended the day at 2,023, could temporarily fall back into the 1,900s as the economy remains good, but not great.
Companies with strong free cash flow have the best chances of achieving growth in the current slow-expansion environment, Doll said. He is targeting firms that earn most of their revenue in the United States and believes cyclical stocks—particularly tech and selected industrials and consumer equities—are cheap given the improving economy.
After the Republicans' Senate victory and consolidation of power in the House of Representatives, Doll said he believes the private sector will remain responsible for driving growth, as politicians appear to be looking forward to the 2016 presidential election.
"Having said that, I don't know that we could have had a more divided, divisive and fractured Congress than the last one," Doll said. "I'm a little more hopeful about this Congress than the last one."