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“With widespread expectations for a pullback, and many looking to buy on the dip, any near-term pullback we get could be shallow and short-lived,” Savita Subramanian, an equity strategist with Bank of America Merrill Lynch, told clients.

She said that corrections of 5% or more typically happen about five times a year, with the last one occurring in November 2012.

Any near-term pullback we get could be shallow and short lived

“Fundamentals and valuations remain attractive, and investors continue to be skeptical of the strength and sustainability of this bull market. That is all very bullish for equities, and as the year progresses we expect further evidence that the global recovery remains intact,” she added.

The strategist also pointed out that while the S&P 500 is essentially flat over both the past five and 13 years, the underlying fundamentals have improved.

For example, the index’s leverage ratio has been cut in half since the last peak in 2007. Meanwhile, profits are 13% higher and its dividend yield is 30 basis points higher.

On valuation, Ms. Subramanian estimates the S&P 500 is 10% cheaper in real terms and on a price-to-earnings basis compared to 2007, 17% cheaper on EV/EBITDA and 25% lower on price-to-book value.

“Based on these improvements, we find it somewhat surprising that it has taken this long to make new highs,” she said.

Deutsche Bank equity strategist David Bianco also looked at dips of 5% or more, noting that while they are inevitable, they don’t happen in the absence of bad news or emerging risk.