This is John Persinos, editorial director of Investing Daily, with a video alert for Monday, April 13.

In the following video, I provide a concise dissection of the stock market rally and how you should capitalize on it. For a longer and more in-depth analysis, read my article below the video.

 

The Wall Street expression “dead cat bounce” stems from the idea that even a dead cat will bounce if it falls from an extreme height. Whether the recent rally has momentum or not, we can at least be grateful for another week of gains.

As of this writing Monday morning, all three main U.S. stock market indices were trading in the red, as investors nervously awaited the start of corporate earnings season and digested the latest news about the pandemic.

Regardless, during the past holiday-shortened week, the S&P 500 posted its biggest weekly gain since 1975. The flattening of infections and deaths in Europe and the U.S. fueled hopes (probably unrealistic) that the coronavirus pandemic would soon be behind us.

It was the second consecutive week of gains for stocks. The Dow Jones Industrial Average and S&P 500 have roared back with gains equivalent to a new bull market (see table).

Since the March 23 closing low for the S&P 500, 10 of its 11 sectors are up 20% or more. Investors are cheered by monetary stimulus from the Federal Reserve and fiscal stimulus from Congress.

Crude oil prices declined last week and currently hover at a level whereby most oil producers can’t break even. But good news for the energy patch arrived Sunday night, when OPEC+ reached an historic deal to slash oil production by 10%. We’ll see if de facto OPEC leader Saudi Arabia and its fickle partner Russia can put aside their differences and make the deal stick.

Since its March 23 low, the S&P 500 has rallied about 25%. And yet, the unemployment numbers are abysmal and corporate quarterly earnings are projected to be negative for the first and second quarters.

What explains the disconnect? Wall Street is hoping that stimulus measures combined with a quick end to the pandemic will lead to a “V” shaped recovery.

I wouldn’t be so sure. The virus is far from contained. Consumers and corporations are suffering cash crunches and falling deeper into debt. The bounce so far in stocks is welcome, but they’re still down about 18% from their February highs.

Economists at JPMorgan Chase (NYSE: JPM) are forecasting that U.S. gross domestic product (GDP) will plunge by 40% through the spring months. That would represent the worst quarterly GDP drop in U.S. history. They also predict unemployment will reach 20% in April, with 25 million jobs lost overall.

I’m not being bearish for its own sake. I’m an optimist by nature. But bear markets often experience brief bull phases that fizzle. Such was the case during the Great Depression of the 1930s and the Great Recession of 2008-2009.

Read This Story: Stock Market Rebound or…Bear Trap?

The bear market triggered by the coronavirus happened quickly, but the recovery in stocks will take longer. Economic damage from COVID-19 is extensive.

The two-week rally has been impressive, but historical context is less than reassuring. During the Dow’s long history, there have been 38 other times when the index rallied to an equal degree, or even more, in a similarly brief period. All of those rallies occurred during the Great Depression and they all quickly died.

There’s no silver bullet…

Some political and industry leaders are clamoring to ease social distancing and reopen the economy. Infectious disease experts say it would be premature. The World Health Organization warned countries on Friday not to roll back restrictions and raised the alarm about the virus gaining hold in Africa.

As of Monday, the COVID-19 pandemic has generated more than 1.8 million confirmed cases and more than 115,000 deaths. In the U.S., we’ve seen approximately 558,000 cases and 22,100 deaths. Health care systems are overwhelmed.

The recent stock market rally was triggered by relatively reassuring news about the virus, as cases plateau in hot spots in the Northeast. However, we’re likely to see setbacks in handling the pandemic, which means we’re living under the constant threat of panic-driven sell-offs. China on Monday reported its highest number of new coronavirus cases since early March, yet another sign that we’re not out of the woods yet.

This week, first-quarter earnings results will start coming in, with the big banks leading the way. These profit report cards will provide clues as to the business conditions we can expect in Q2.

Don’t expect a silver bullet to slay the pandemic. Experts say a COVID-19 vaccine could take as long as three years to create. In coming weeks, the stock market will probably retest its COVID-19 lows.

A bet on post-COVID resurgence…

Despite these dire economic conditions, you can position your portfolio for future gains. Technology stocks involved in mobile, work-at-home technologies are poised to soar in the post-pandemic world.

As workers are ordered to stay home, cloud activity and Internet usage are off the charts. Quarantined people are heavily leaning on their tech gadgets, especially smartphones. E-commerce companies are ramping up employment to meet rising demand from home-bound consumers.

Social media and streaming entertainment are enjoying surges in demand. From personal experience with the social quarantine, I can tell you that my wife and I have been binge watching movies and TV shows like never before.

Once the global economy gets on the other side of this crisis, the tech sector is likely to regain its leadership position in the stock market. At the center of these tech trends is the Internet of Things (IoT).

IoT is a seamless system whereby everyday objects are integrated into a data-sharing network. IoT is revolutionizing our lives, by giving birth to collaborative workplaces, driver-less cars, self-calibrating medical devices, smart homes, automated warehouses…the list of applications is long.

During the pandemic, new consumers are getting introduced to the world of hyper-connectivity. They’re likely to become life-long converts.

Driving IoT will be 5G (“fifth generation”) technology, the latest iteration of wireless capabilities. 5G will facilitate IoT by allowing interconnected machines to communicate instantaneously at ultra-fast speeds that leave 4G in the dust.

That spells opportunity for the shareholders of chipmakers, telecoms, systems builders, and device makers that benefit from lightning quick connectivity. Once the virus is contained, these stocks will soar. Are you interested in the investment opportunities of fifth-generation wireless? Click here for our latest 5G report.

We’re going through tough times, but I assure you, this stretch of pain will pass. If you have questions or comments, I’m easy to reach: mailbag@investingdaily.com