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S&P 500 could hit 2,100 by year-end: Fundstrat's Tom Lee

That recent selloff in the small caps? It was actually an "extremely bullish signal" that could help propel the S&P 500 index past the 2,100 level by year-end, Wall Street strategist Thomas Lee told CNBC on Monday.

The setup for the final three months of the year is "quite constructive" following the pounding small-cap stocks had endured in the last few months, Lee, co-founder of Fundstrat Global Advisors, said on "Squawk on the Street."

"The nine times the Russell has underperformed the S&P since its inception, which is '79, only two of them were associated with bear markets. Most of this time, small caps underperform because of either a rotation [or] risk abatement," he said. "In this case, we've had a lot of movements across markets that have rattled people and I think that explains why small caps have underperformed. But it's usually an extremely bullish signal. This is an end of a selloff."

Thomas Lee, co-founder of Fundstrat Global Advisors
Adam Jeffery | CNBC
Thomas Lee, co-founder of Fundstrat Global Advisors

Lee, drawing from his 25 years of experience on Wall Street, noted that 80 percent of the time, the S&P 500 produces annualized returns of at least 12 percent when the small caps underperform the index.

Meanwhile, Lee closely will monitor the start to third-quarter earnings season. Nine S&P 500 companies are scheduled to deliver earnings this week. Lee thinks most companies will surprise to the upside. Though a stronger U.S. dollar could hurt the top and bottom line, he thinks it will make less of an impact than commonly thought.

Read MoreEarnings season begins: Bright spots and worries

Separately, news that Hewlett-Packard will split its hardware and services businesses from the personal-computer and printer business bodes well for tech, Lee said.

"When investors look at valuation opportunities in technology, this is a way for multiples to re-rate because now you can look at pure-play businesses. You got management focused on optimizing the returns on the assets of those specific businesses, so I mean it's very good news," he said, adding that tech has "many years to run."