The majority of fund managers surveyed by Bank of America last week said they think we are in a bear market rally rather than a new bull market and few expect a V-shaped recovery. The rally in risk assets has been driven by monetary and fiscal policy, but the response hasn’t mitigated devastating outcomes in the real economy, Ed Harrison said during today’s Real Vision Daily Briefing.

He said we could get a snap back but it won’t go to 100%. Instead, it will go to 80% or 90% and then you have to grind the rest of the way there and that’s where the risk is for equities and junk bonds.

Harrison also talked about uncertainty around both the virus trajectory and policy response with regard to the Eurozone. He said investors who want a risk trade could play the pairs trade of Germany and the Netherlands versus Greece and Italy, but for those who want to mitigate downside risk, Spain is a much better bet. 

Harrison said he thinks Spain will continue to converge as the Eurozone heals and they’ll benefit most from the economic, tourism, and budgetary perspectives.

“The way I would play it would be Spanish convergence toward Germany rather than Italian or Greek convergence toward Germany,” he said.

Domestically, Harrison is watching the performance of beaten down sectors like oil and banks to gauge whether this rally is sustainable over the long term. He said the difference between depression with small D and a Great Depression is how the financial sector is affected and that American banks are better positioned than European banks to withstand the write downs that are likely to come.