The bear hasn’t returned to hibernation. He’s merely hiding around the corner, ready to pounce at any time.

The recent rally we’ve seen in stocks probably has topped out, at least for the short term, as overly optimistic investors become more realistic in the face of the still-damaging coronavirus pandemic.

As of this writing Wednesday morning, the three main U.S. stock market indices were trading deeply in the red. Investors are rattled by the latest earnings and economic reports, which are shocking. The CBOE Volatility Index (VIX), aka “fear gauge,” is soaring.

It begs the question in my mind: with most of the country under quarantine and unemployment reaching Great Depression levels, why is anyone surprised by the latest batch of negative data?

Today’s stock market swoon is a reversal of Tuesday’s broad-based relief rally. Yesterday, investors were cheered as the governors of large U.S. states discussed plans to reopen their economies.

The market has been extremely volatile in recent weeks, posting sharp ups and downs based on COVID-19 headlines. This morning’s headlines are grim. Accordingly, stocks are heading south again.

The U.S. Commerce Department reported today that retail sales in March were gutted by the social distancing and job losses caused by the pandemic. Headline retail sales plunged a record 8.7% during March, worse than the 8% decline expected by economists. All major retail categories were crushed.

First-quarter earnings today also spooked investors. Before the opening bell Wednesday, Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), and Citigroup (NYSE: C) all reported major hits to Q1 profits, largely due to the pandemic. Major banks so far have all reported 40%-plus declines in profits as they set aside billions to cover expected loan losses. Financial services stocks are getting clobbered today.

As retail sales nationwide plunge, retailer Best Buy (NYSE: BBY) announced Wednesday that it will temporarily furlough about 51,000 domestic hourly store employees starting April 19.

Despite the recent happy talk of political and business leaders who are impatient for a return to normalcy, COVID-19 remains a life-and-death reality. Positive rhetoric won’t make the virus simply go away.

That said, there’s cause for a modicum of optimism. Ten U.S. states are coordinating plans to put aside social distancing policies and open businesses shuttered by the coronavirus pandemic. Three states on the West Coast, led by California, and seven on the East Coast, led by New York State, are forging regional plans. Collectively, the 10 states account for nearly 40% of U.S. gross domestic product (GDP).

Meanwhile, COVID-19 cases are leveling off in the U.S. According to the United Nations, the number of cases are declining in China as well.

However, first-quarter earnings reports to date are mostly dreadful, with the big banks kicking off what’s expected to be a poor season overall.

The analyst consensus calls for a decline of about 10% in earnings per share for S&P 500 companies for the first quarter and a whopping decline of 22% for Q2. Corporate top and bottom lines are under severe pressure, as economic damage from the pandemic gets worse.

Read This Story: The D-Word: How Bad Will The Economy Get?

Economists are forecasting that U.S. GDP will plunge by 40% through the spring months. The picture looks brutal for Europe as well. An early hot spot for the coronavirus, Italy is projected to take the worst hit (see chart).

Problem is, European economies already were in rough shape. Italy’s banks are saddled with unsustainable debt. Britain is struggling with the chaos of Brexit. Export-dependent Germany still suffers from the Sino-American trade war. Throughout Europe, the economic effect of COVID-19 is akin to throwing an anchor to a drowning man.

Purchasing manager index (PMI) readings for the eurozone fell in March for both manufacturing and services. The eurozone is the geographical area comprising the countries that use the euro as the official currency.

A PMI reading above 50 indicates expansion while a reading below 50 indicates contraction. The services PMI plummeted from 52.6 in February to 26.4 in March, a record low for this indicator. The manufacturing PMI also fell, from 49.2 in February to 44.5 in March. These two declines fueled a sharp contraction in the composite PMI, which fell from 51.6 in February to 29.7 in March, a new low for this gauge as well.

By natural temperament, I’m an optimist. But bullishness right now is unwarranted. Historically, bear markets are punctuated by sharp rallies. The stock market during the Great Depression witnessed several rallies; they all fizzled.

Unless a COVID-19 vaccine is soon developed, stocks are vulnerable to additional declines. Experts say a vaccine could take as long as three years to develop. The market’s underlying fear in April could easily trigger the sort of panic-selling we witnessed in March.

The House of Troubles…

In the energy patch, the bear is in full-throated growl. Layoffs and bankruptcies are gathering steam, which threatens banks with loan exposure to energy companies.

Read This Story: OPEC’s Oil Cut: Big Deal or Big Dud?

Despite the much-ballyhooed crude oil production cut reached Sunday, oil prices have fallen to an 18-year low. The OPEC-initiated deal was supposed to bring equilibrium to energy and financial markets, but I suspect it was kabuki theater to reassure energy sector investors.

The show wasn’t convincing. Collapsing energy demand because of COVID-19 can’t be solved by cosmetic production cuts and hyperbolic tweets. Crude prices continue to tumble. The price of oil currently hovers near $20 per barrel, well below the breakeven level for most oil producers.

Erstwhile boogeyman OPEC has become a paper tiger. Cartel leader Saudi Arabia grapples with energy demand destruction, rivalry with Russia, internecine family feuds, social unrest, and a rapidly depleting national treasury. The House of Saud has become the House of Troubles, which bodes badly for the broader financial markets.

The trifecta of growth, safety and income…

Sure, I just painted a dire picture, but don’t despair. There’s still money to be made in the market. Under the aforementioned conditions, a smart move now is to increase your exposure to dividend stocks. This asset class provides higher safety, but with plenty of growth and income.

Dividends not only motivate top executives to deploy capital efficiently, they also send a clear message that management is treating shareholders right by paying them the profits they deserve as co-owners of the business.

What’s more, a steady stream of dividends indicates financial transparency. You can hide a lot of bad news with tricky accounting, but you can’t fake dividends. Reliable dividends translate into reliable bookkeeping.

Stocks have partially rebounded from their bear market lows, but the coronavirus pandemic isn’t behind us and you can expect further volatility and sell-offs ahead. Dividend-paying investments are suitable for bull or beat markets, but they tend to weather bear markets better than riskier momentum stocks.

Not only are top-quality dividend payers attractive sources of steady income, they also offer the potential for strong growth. According to research from asset manager BlackRock (NYSE: BLK), stocks with high dividends outperform non-dividend payers in all economic conditions, rising more than companies without dividends in bull markets and posting smaller declines in bear markets.

Our investment experts have pinpointed a bevy of high-quality, double-digit yielders. If the bear attacks again, you can beat him with these income plays. Want to learn more? Click here for our dividend report.

John Persinos is the editorial director of Investing Daily. Comments and questions are welcome: mailbag@investingdaily.com