The key factor for the stock market in coming months will be the pace at which the global economy slows, Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, told CNBC Monday.

Some analysts expect slow growth ahead, but do not predict a double-dip recession, saying that the corporate sector has adjusted already.

“The market is moving back and forth between hope and fear. The market is at the same time complicated and extremely easy to understand. There are only two games in town, the risk on and risk off trade” Gijsels told CNBC.

“Expect volatility to remain quite high as long as the market does not have an answer to the most important question: how strong will the slowdown be in the second half of this year and going into 2011,” he added.

Following data showing US GDP growth was weaker than first estimated, Gijsels warned the second half will see even weaker growth.

“We expect weakness in the second half of the year as the positive inventory correction has run its course and fiscal measures start to work against the economy,” he said. “Although it is not the base scenario, there is still a big chance of a double dip.”

Investors should focus on high quality stocks, Gijsels said. (Check out world markets here)

“We still continue to favor defensive sectors and high quality companies with strong balance sheets, a strong brand and the potential to benefit from the weakness of others; we call these companies Darwinistic survivors,” he said. 

These stocks are normally strong dividend plays, said Gijsels, but he warned investors to stay clear of financials and basic resources stocks, which are vulnerable in a sell-off.

“We are in a bear market rally and not a big bull market. For a new bull market needs new market leadership,” he said.

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Disclosures:

Disclosure information was not available for Philippe Gijsels or his company.

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