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Stocks headed for pullback. How to play it: Goldman’s Kostin

The U.S. stock market could be heading for a pullback this summer on expectations of higher interest rates, political uncertainty and a pause in corporate buybacks, according to Goldman Sachs Chief U.S. Equity Strategist David Kostin.

With the S&P 500 trading in the 90th percentile of historical valuation on many metrics, the index is at risk of a 5-percent to 10-percent pullback to the 1,900 to 2,000 range, Kostin told CNBC.

Goldman Sachs puts the odds of a July rate hike at 40 percent following last week's disappointing jobs report. Meanwhile, economic uncertainty is creeping up as the presidential election draws closer, he said.

Beginning in mid-June, companies will stop buying back their stock prior to issuing earnings reports, sapping liquidity from the market, Kostin said. Those discretionary purchases won't pick back up until August, he added.

"If you think about it from a money flow point of view, from a rates point of view, from an economic point of view, there are more risks, and that would be tactically to the downside," he told CNBC's "Squawk on the Street" on Tuesday.

In this environment, Kostin said he has his eye on companies with the ability to raise their margins, such as Starbucks and Amazon.

Investors should also be on the lookout for companies with low exposure to rising pay, as wage inflation puts pressure on margins, he said.

Goldman also likes stocks with above-average dividend yield that are also growing those dividends, such as Cisco and Honeywell, Kostin said.

Disclosure: Goldman Sachs provides investment banking services to Starbucks, Amazon, Cisco and Honeywell.