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How to ride out a 'rough' finish to 2015: Merrill CIO

The fourth quarter looks like it will be bumpy, and investors shouldn't plan on taking on extra risk in the final months of 2015, Bank of America Merrill Lynch's Christopher Wolfe said Wednesday.

Three big fears are looming for the chief investment officer: a corporate earnings recession, uncertainty swirling around worldwide monetary policy and downward revisions to corporate sales and guidance for the remainder of 2015 and likely part of 2016.

"That recipe is for a lot of market turbulence," Wolfe told CNBC's "Squawk Box."

Investors have already weathered a rocky ride in the third quarter. The Dow Jones industrial average and S&P 500 are down nearly 9 percent and tracking for their worst quarterly performance since the third quarter of 2011. The Nasdaq is down 9.4 percent.

Read MoreWhy stocks won't recover for positive 2015: Blitzer

One thing that could help stocks break out is an announcement of major fiscal stimulus at a meeting of China's leadership in October, Wolfe said. That would potentially stop the export of deflation from Asia, he added.

Still, he said, there is much that could derail the view that the U.S. economy is doing "just good enough," from the absence of fiscal stimulus around the world to the budget showdown in Washington.

Instead of taking on additional risk, investors should be upgrading their portfolios and focusing on U.S. companies with higher-quality cash flow and high credit rating, Wolfe advised.

He said Japan also looks interesting as profit margins have crept up toward 10-year highs.

"I feel pretty comfortable with the restructuring reform programs. It's taking a long time but working out, so a lot more positives than negatives," he said, referring to Prime Minister Shinzo Abe's multiyear effort to turn around Japan's economy.

The biggest common factor among stocks that have sold off in the third quarter is a heavy debt load, said Paul Ebner, senior portfolio manager at BlackRock. The recent selloff in shares of highly leveraged mining giant Glencore is the best example of investor sentiment on corporate indebtedness, he told "Squawk Box" on Wednesday.

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