Technical strategists cite stretched valuations and weakening momentum as catalysts for a third-quarter correction in U.S. equities.
Bank of America’s technical team warns U.S. stocks may enter a corrective phase in Q3 after a strong first-half rally in 2026. The call follows signs of stretched valuations, slowing momentum, and rapid margin debt growth, alongside seasonal trends favoring consolidation over the summer months.
The bank’s outlook contrasts with the S&P 500’s recent gains, though it aligns with historical patterns of mid-year pullbacks. Prior to this, equities had surged on improving economic data and easing monetary policy expectations, but technical indicators now suggest a near-term reversal.
Bank of America also forecasts a stronger U.S. dollar and further euro weakness, while Brent crude is expected to stabilize between $65 and $85 per barrel after a recent sell-off.