Invesco chief global market strategist Kristina Hooper sees a volatile dynamic between optimism and pessimism playing out on Wall Street.
According to Hooper, it will contribute to seesaw market behavior for months.
"We are going to see some pretty significant economic headwinds in the near term driven by Covid-19," Hooper told CNBC's "Trading Nation" on Monday. "There will be bad days when stocks are weighted down by negative news flow around infection rates as well as difficulties with vaccine distribution."
Her base case: The U.S. won't see a strong economic rebound until later in the year.
"There are likely to be some down days, especially in the first quarter, just given what we're up against, and just the reality that we're unlikely to see broad distribution of vaccines in the U.S. until midyear," said Hooper, who oversees $1.2 trillion in assets.
Until then, she predicts, investors will be going back and forth between economically tied market groups and defensive or growth stocks, including technology — particularly since interest rates remain so low.
In her latest weekly note, Hooper wrote: "Low interest rates help this situation given that tech valuations are admittedly stretched; investors have historically been more forgiving of valuations with rates so low."
"So many areas of technology have benefitted from the pandemic," said Hooper. "The pandemic really just accelerated a number of trends that have been in place for years like e-commerce."
For the momentum to continue, Hooper emphasizes that rates must remain low. And, that's why she believes this week's two-day Federal Reserve meeting, which ends Wednesday, is key to watch.
"We need to hear reassurance from the Fed," she said. "We need [Chair] Jay Powell in his press conference to underscore that the Fed is going to remain accommodative, and that it is going to be tolerant of higher inflation in order to support the economic recovery."
If the Fed calms inflation jitters and Covid vaccine accessibility vastly improves, Hooper predicts wild market swings will diminish.
"There is just so much monetary policy accommodation, and that has been so supportive of equities. We saw this play out during the global financial crisis," Hooper said. "By and large, I would expect stocks to perform well. The bias is clearly upward for equities."