The stock market could face a near-term correction of as much as 12% before continuing its bull rally this summer, BofA says

• A stock market correction of as much as 12% could be imminent, according to Bank of America.
• The bank laid out a stock market roadmap that includes a decline before a summer bull rally.
• "We would not rule out an April-May pause ahead of a June-August summer rally," Bank of America said.

US stocks have been on a tear so far this year, surging about 10% in what has become the 14th best first-quarter return on record, according to Bank of America.

But considering that 2024 is a Presidential election year, stocks are likely due for a pause over the next two months before a summer bull rally, technical strategist Stephen Suttmeier said in a note on Tuesday.

Suttmeier highlighted that April and May have historically been weak months for stocks during a Presidential election year, with the S&P 500 flat in April and down 1.1% in May, on average.

"Given this uninspiring seasonality, we would not rule out an April-May pause ahead of a June-August summer rally," Suttmeier said.

It's been 59 days without a 2% pullback in the S&P 500, according to data from YCharts, so a correction is likely overdue.

If a sell-off does materialize in the stock market, Suttmeier highlighted the following support levels to watch on the S&P 500: 4,800 and 4,600, which represents key breakout levels from December.

A decline to 4,600 on the S&P 500 represents potential downside of 12% from current levels, which would be a garden variety sell-off for investors.

"The 4,800 and 4,600 area breakout points offer big supports for the rest of 2024," Suttmeier said.

But if the S&P 500 does fall back down to the 4,600 area, that doesn't mean the bull rally is over, according to Suttmeier, who put out a long-term technical price objective of 6,150, representing potential upside of 18% from current levels.

"The January breakout above the 4,800 area does not rule out 6,150, which aligns with the catch-up trade potential for a secular bull market Presidential Cycle into yearend 2024," Suttmeier said.

The bull rally gains could be even higher based off the current magnitude of the stock market's rally that began in October 2022, according to the note.

Suttmeier said that the S&P 500 has rallied 47% from its October 2022 low, which is more than half of median stock market rallies from big lows of 106%, which last approximately four years. That suggests to Suttmeier that the S&P 500 could ultimately trade to 7,000 into late 2026, representing potential upside of 34%.

So, while the stock market is likely due for a correction in the short-term, that should be viewed as a buying opportunity as the broader bull market remains intact.