U.S. stocks have rallied so far this year, mostly led by mega-cap growth stocks, but the situation could change in the third quarter, according to Jonathan Krinsky, managing director and chief market technician at BTIG.
The large-cap S&P 500 SPX and the tech-heavy Nasdaq Composite COMP have gained 14% and nearly 30% so far this year, respectively, while the small-cap Russell 2000 RUT , which is made up of the smallest 2,000 companies in the broader Russell 3000 by market capitalization, rose only about 7% over the same period, according to FactSet data.
Mean reversion refers to an assumption that assets’ prices will tend to revert to the long-term average over time. Meanwhile, the technical set-up remains for a “more significant broad-based selloff” in U.S. stocks later this year, Krinsky noted.