As investors look toward the rest of the year, they need to be careful with momentum stocks, particularly those whose momentum is "hidden," BlackRock global chief investment strategist Russ Koesterich said on Tuesday.
That's because although volatility has been fairly low so far this year, it has been rising since 2014, and if the Federal Reserve starts to normalize interest rates in the back of the year, volatility is expected to increase, he explained.
"Historically that's been a problem with momentum stocks. The tricky thing this time is that some of the names you don't normally associate with momentum, such as yield plays, might be the some of the most vulnerable," Koesterich said in an interview with "Power Lunch."
He thinks defensive dividend plays such as utilities and REITS are likely to be affected, "even with a modest backup in rates."