Although stocks are deep in the red today, the major US indexes have rebounded from their recent lows. But whether this rally can stick remains to be seen.
“Now we’re worried about the second wave [of coronavirus infections],” said Brian Belski, chief investment strategist at BMO Capital Markets. “Let’s get through this first wave first and get people back to work.”
The real economy and the stock market are not very correlated, Belski warned. So people shouldn’t assume the pace of a recovery will match any rebound in the stock market.
The recent rally is simply discounting what will happen in six months, he added. The true test of whether the rally can stick is still ahead. The first quarter of this year showed only some of the pandemic’s impact. The second quarter will likely be far worse.
Economists predict a snap-back in the third quarter, but it’s unclear by how much. After all, economic data for the second quarter won’t be available until well into the fall, making it difficult to assess the conditions at hand, Belski cautioned.
“That’s why investors should take a long-term view,” he added.
