Biggest market risk is an earnings setback that'll lead to a correction: Blackstone's Joseph Zidle

VIDEO1:4301:43
Biggest market risk is an earnings setback: Blackstone's Zidle

Blackstone's Joseph Zidle is warning investors earnings season could go awry.

With almost half of S&P 500 companies reporting quarterly earnings so far, Zidle believes a lot could still go wrong. He lists an earnings setback as the most legitimate risk that would spark a correction.

"We might see earnings growth at approximately zero for the first quarter, and I think we could also see earnings growth at approximately zero for the second quarter," the firm's chief investment strategist said Thursday on CNBC's "Futures Now. " "It's going to leave investors questioning what's next."

Zidle sees the major indexes' sharp rally off their December lows as a signal that stocks are vulnerable  right now.

"I don't think these price gains are going to be sustainable," he said. "I do think this near-term volatility is a real possibility."

Zidle, who considers himself near-term cautious, but a long-term bull, has a  year-end forecast of 2,875, 2% below Friday's close. He has the chance of a 10% correction baked into the estimate.

"The good news is, however, that this earnings cycle will have a chance to not only trough, but ultimately recover before we hit the end of the economic cycle," noted Zidle. 

If stocks sell-off on a bad batch of earnings, he'd target cyclical groups such as energy, materials, industrials, technology and consumer discretionary.

"I think this economy continues to grow for years," Zidle said. "Therefore, any weakness in the short term I would lean into, and I think it would be a buying opportunity."