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It's about to get rocky for stocks: Billion-dollar strategist

The U.S. market is breaking records, with the S&P 500 and the Dow Jones industrial average both at all-time highs. However, the road to even higher returns will be rocky, according to Dan Morris, global investment strategist for TIAA-CREF, which holds $840 billion in assets under management.

To be sure, Morris sees the markets as being driven by central bank stimulus in addition to encouraging fundamentals.

"Certainly, what's going on with the central banks–the ECB and the Bank of Japan–increasing their own QE [quantitative easing] policies has helped," he said. "Secondarily, you've got better economic numbers out of the U.S. so that's certainly encouraging for the U.S. market. Falling oil prices are obviously another key indicator that pretty much helps everyone–even if it does hurt some companies in the energy sector."

(Read: US economy expands strongly in Q3, ignoring uncertainty abroad)

"It's kind of one of these nice moments when the agglomeration of the data that you're getting is, broadly speaking, positive," Morris added.

But despite those positives, he sees vulnerabilities ahead, as the U.S. transitions out of QE and into a market where rates are higher. "That's going to be a bumpy transition," he said. "We should kind of enjoy this relative low-volatility, rising environment but I think appreciate that we're more likely than not to get another bout of volatility like we had recently as the market starts focusing again on rising interest rates in the U.S."

In the meantime, Morris prefers overseas equities.

"Valuations are much higher in the U.S. than they are elsewhere, particularly compared to Japan and emerging Asia in particular," he said. "From that kind of perspective, even if we appreciate there's going to be some bumps—on a long-term horizon those markets probably do look more attractive."

(Watch: Stock futures higher after upbeat read on US growth)

Nonetheless, Morris believes even some emerging countries will run into trouble if rates rise domestically.

"Those emerging markets that do have big current account deficits, budget deficits, are going to be hit when interest rates start rising in the U.S.," he cautions. "You might want to think back to those 'Fragile Five' [Brazil, India, Indonesia, South Africa and Turkey] that we had during the taper tantrum. They may come back into the headlines."

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