US Markets

Get ready for return of volatility: Bernstein CIO

Expect 2% economy in second half: Pro

Measures of market volatility are poised to tick up following a period of relative stability, Bernstein Chief Investment Officer Seth Masters said Monday.

The CBOE Volatility Index (VIX) has fallen more than 20 percent this year, but Masters said AB Bernstein is positioning for a return of heightened risk.

"There are lots of structural uncertainties in this environment that are actually exerting a chilling effect on the decision-making of companies and consumers," he told CNBC's "Squawk Box."

While lower oil prices are a net benefit to consumers, most companies and many nations, stakeholders are uncertain where crude futures will land in the near future, he said.

"If you're making a big investment decision, that's a problem," he said.

In addition, persistent questions about the strength of China's economy, the risk of Britain leaving the European Union, signs of renewed trouble in Greece and regulatory uncertainty are creating mounting structural risk, he said.

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Masters said AB Bernstein is responding more slowly than usual to changes in volatility because it expects measures to fluctuate.

The firm has lowered its overweight position to stocks by buying call options, which Masters said are cheap in the current low-volatility environment. These securities allow investors to participate in potential equity market upside while reducing downside risk, he said.

AB Bernstein has overweighted high-quality bonds, as well as U.S. and emerging market securities, he said. The firm has been underweight emerging markets for two years, but Masters said valuations in the developing world are currently discounted and both exports and market sentiment are improving.

— CNBC's Lauren Alperstein contributed reporting to this story