The S&P 500 continued its slide in early Monday trading, retesting the lows set on March 13, when the index closed in correction territory.
The market downturn may make some investors apprehensive. However, James Demmert, chief investment officer of Main Street Research, said it may be more indicative of a standard correction than of a deeper bear market.
"Market retests are relatively common during corrections, and the fact that we are seeing this retest play out within weeks is further confirmation that we are in a correction and not a bear market," Demmert wrote.
His firm set its year-end price target for the S&P 500 at 7,050, higher than the Wall Street average of 6,607. This bullish view is based on projections for deregulation, corporate tax cuts and increased productivity resulting from artificial intelligence.
Demmert believes the market is oversold and could swing the other way. With earnings season around the corner, he thinks this may provide a catalyst to start a rally.
"Back in February, the stock market was overbought and ripe for a correction, but now the pendulum has swung the other way, and we are oversold and the market is ripe for a rally. Many times, investors dismiss an oversold market and miss out on the recovery," he said.
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