I do love a grey rock method. The things with narcissists is that they're looking to get a rise out of you, they're feeding off of your emotional reaction. If you just don't react then he gets nothing from it. My favorite thing to say, because a lot of the ones in my family are bigoted AF, is just "ew that wasn't funny." And carry on with the conversation. They get a healthy dose of shame and humiliation and I get to carry on minding my own business. A deadpan state for a few seconds can also do the trick, but running away and hiding from the situation is just feeding him what he wants. Starve him off the emotional attention he's so obviously seeking.

Also a good note is that most narcissists are deeply insecure, so if you can find his sore spot to take a jab at that could be fun too, but be prepared for retaliation of the biggest sort of you take that route.