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Deutsche Bank sees significant market pullback in the next three months

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A pedestrian passes in front of a statue of a bull in the Wall Street area in New York City.
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Expect a significant pullback in stocks in the next three months, as gauges of macroeconomic growth reach their peak this summer, according to Deutsche Bank's chief U.S. equity strategist.

Binky Chadha warned clients in a note Monday that he forecasts a "significant consolidation" in equity markets in a range between a decline of 6% and 10% as economic growth levels off.

He and Deutsche Bank measure cyclical macroeconomic growth with the Institute of Supply Management's manufacturing index.

ISM growth "typically peaks around a year (10-11 months) after recession ends, right at the point we would appear to be," Chadha wrote. Historically, "the S&P 500 sold off around growth peaks by a median -8.4%, but even episodes which saw the ISM flatten out rather than fall, saw a median -5.9% selloff."

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