Analysts at Wells Fargo believe the S&P 500 pullback may provide a "great" rebalancing opportunity.
After reaching a record high on March 28, the S&P 500 Index hit a soft patch in April. Wells Fargo also noted that sticky inflation readings and the lower probability of multiple Federal Reserve (Fed) interest-rate cuts this year led to higher long-term rates.
"We believe this ultimately weighed on equity prices, especially areas that are more rate-sensitive (think U.S. Small Cap Equities)," said the bank.
"While the index remains in an uptrend and has bounced from oversold conditions, equities remain in a corrective phase that we think could linger until the path of inflation and Fed rate cuts becomes clearer."
The bank went on to explain that modest pullbacks of 5% to 10% are typically called "garden variety," as they are commonplace in equity market investing.
"It often has been a way for equity markets to reign in excessive optimism and create better balance between prices and fundamentals," Wells Fargo adds. "Stock market pullbacks can be viewed as an opportunity for investors to rebalance portfolios and deploy excess cash."