Heading into another earnings season, expectations for corporate profits are somewhat troublesome, Russ Koesterich, global chief investment strategist at BlackRock, said Wednesday. But there's light at the end of the tunnel later this year, he added.
"Earnings are supposed to be down 3 percent or 4 percent [in Q1] year over year," Koesterich told CNBC's "Squawk Box" in an interview. "[But] my guess as you get into Q2 and Q3 there will be enough of a recovery to start to drive earnings."
He did warn about price-to-earnings multiples getting into the "danger zone" if they were to continue to expand for another year or two.
But overall, the BlackRock strategist said: "You can still buy this market. I think you have a supportive Fed."
The Federal Reserve will likely hike interest rates for the first time in nearly a decade in September, Koesterich predicted, but stressed what happens after the initial move is more important. He sees a "shallow cycle" of rate increases. "We're not going to get that very steady [series of increases] of a quarter point, a quarter point. It's going to give the economy time to recover."
Another bullish sign for stocks, according to Koesterich: "You've got low inflation. Lower oil is actually a tail wind."
The collapse in crude, which has actually seen a slight recovery recently, had sparked speculation about megamergers. And Wednesday, in the biggest energy deal in more than 15 years, Royal Dutch Shell agreed to buy U.K.-based BG Group for $70 billion.
"This is in an environment where it's easy to do deals. Money is not only free, in some cases you're actually getting paid to borrow," Koesterich said. "Twenty-five percent of the European sovereign debt market yields are in negative territory."
His advice to investors who want to play the oil sector: Buy the large integrated energy companies. "They're cheap" relative to the overall stock market, he contended, while offering a "reasonable yield play."
"You've [also] got downstream operations. ... at least a part of that business, lower oil prices are supportive," he said. Downstream operations refer to activities like refining crude and distributing the finished product to the retail market.