U.S. markets are "overdue" a 10% correction, with stocks largely in overbought territory, according to James Demmert, chief investment officer of Main Street Research. Investors are also "very complacent," which was the case before the past three major declines within this 18-month bear market, he said last week.
Demmert pointed to the narrowing leadership of the index — with just seven megatech stocks driving much of the gains this year. However he predicted that one trigger could drive stocks into a new bull market: money rotating out of the seven stocks and into the rest of the market "that have been completely ignored.
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