Sometimes it seems to me that interpreting Federal Reserve statements requires the parsing skills of a Talmudic scholar. In today’s column, I examine the latest “Fedspeak” and try to divine what it means for investors.

U.S. Treasury yields declined Wednesday after Federal Reserve Chief Jerome Powell reiterated the central bank’s pledge of easy money and massive stimulus for the economy.

In a press conference Wednesday, Powell said the Fed would maintain bond purchases at “the current pace” of around $80 billion per month in Treasuries and $40 billion per month in agency and mortgage backed securities. He projected no interest rate increases through 2022.

Notably, Powell threw some shade on the much-ballyhooed May jobs report:

“The evidence of one jobs report is that the labor market may have hit bottom in May. We don’t know that, we’re going to see. Many forecasters widely expect a recovery over the second half of the year, so it is possible. We’re not going to overreact to a single data point. We’re going to be very careful about reaching any conclusions about good data or bad data. We’re going to be here with our tools supporting this economy for as long as it’s needed.”

As I’ve recently written, I’m highly skeptical that unemployment has bottomed. Wall Street popped the Champagne corks over the May report, but the enthusiasm probably isn’t warranted.

Read This Story: The “Creative Accounting” Behind the Rally

Stocks mostly fell in the wake of Powell’s remarks, as investors digested the challenges ahead. The Dow Jones Industrial Average on Wednesday finished 1% lower and the S&P 500 ended down 0.5%. However, the techbology-heavy NASDAQ composite climbed 0.7% to a new record high, finishing above 10,000 points for the first time. Investors are betting that the pandemic will change consumer behaviors in ways that benefit technology companies. Trading was volatile.

In pre-market futures trading Thursday morning, stocks were poised to open sharply lower as coronavirus fears returned. The Dow was set to tumble 650 points, or 2%.

Wall Street in recent weeks has been treating the pandemic as if it were all a bad dream that never happened. However, reports surfaced Wednesday and Thursday that 21 states in the country are experiencing rises in new cases of COVID-19, including a spike in hospitalizations. Cases in the U.S. currently exceed 2 million and new hot spots are emerging. Despite the happy talk of many lawmakers, health experts warn that we’re likely to see a second wave of infections.

The consensus of economists is for a 6.5% decline in U.S. gross domestic product in 2020, with a 9.3% unemployment rate by the end of the year. But those estimates don’t account for a deadly second wave.

The stock market rally has been disconnected from harsh economic and biological realities and that’s largely because of the Fed’s extraordinary actions. The Fed has slashed interest rates to near zero and pledged to buy bonds in nearly all segments of the credit market, including government and mortgage securities and corporate and municipal bonds.

Powell has consistently signaled the Fed’s willingness to do what it takes to keep the economy and stock market afloat. The Fed’s purchases of bonds have expanded its balance sheet from roughly $4 trillion before the pandemic to $7.1 trillion.

Therein lays the rub. To boost the economy the Fed is “pushing on a string,” a metaphor commonly used to describe the limits of monetary policy. The central bank can’t get businesses and consumers to spend if they don’t want to. Low interest rates can’t compel consumers to put aside their fears of coronavirus infection and get on airplanes, eat in restaurants, and gamble in casinos.

Nor can interest rate levels significantly affect the Sino-American trade war, which has flared anew. The last thing the global economy needs now is another tit-for-tat trade battle between China and the U.S., but that’s exactly what we’re getting.

The U.S. Senate has overwhelmingly passed bipartisan legislation that would delist Chinese companies from American stock exchanges if they’re deemed to show insufficient financial transparency. The bill is currently under review in the House. There’s a bipartisan mood in Washington to punish China, in large part for the perception that its government mishandled the COVID-19 outbreak.

More pain to come…

The World Bank published its latest Global Economic Prospects report on Monday and the numbers aren’t pretty. According to World Bank forecasts, the global economy will shrink by 5.2% in 2020 (see chart).

The projected decline in the global economy this year would represent the deepest recession since the end of World War II. In its report, the World Bank stated: “This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.”

Read This Story: Don’t Be Fooled By The Potemkin Recovery

How can you protect your portfolio and still make money? If you’re looking for an asset class with a history of weathering market downturns, consider dividend-paying utilities. These companies provide essential services (i.e., electricity) that people always need, even in a pandemic. For a list of high-yielding utilities stocks, click here.

It’s my belief that additional stock market sell-offs lurk over the near-term horizon. The coronavirus pandemic is far from over and the damage to the economy from quarantines and business closings will continue to show up in economic data and corporate earnings. The virus is a predator that doesn’t care about your politics…nor about policy statements from the Fed.

John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com