Traders ought to keep bearish on U.S. stocks till the total extent of the financial harm attributable to the coronavirus pandemic is thought, in accordance with TS Lombard, which warned that buyers had been over-estimating a fast restoration in U.S. company earnings.Charles Dumas, chief economist on the financial analysis agency, instructed CNBC Tuesday that “the market is actually buying and selling off a view about 2021 that isn’t going to occur.””The essential level right here is that in 2021 the market estimates of S&P earnings should not merely up from 2019 however they’re proper again on the long-term development pattern, which is extremely unbelievable. On our forecast, the connection of the financial system to earnings produces a 2021 quantity that’s down in all probability round 20% from the 2019 degree,” he stated.”Basically what we’re saying is that the market is smoking dope on earnings, for one. And for 2, it is (buying and selling) at a P/E (price to earnings) ratio that even in relation to its personal optimistic view about earnings, takes you proper again to the 1999-2000 peak of tech bubble.”P/E ratios — typically intently watched by buyers — are the present share price of a stock divided by its earnings per share.Dumas was increasing on a TS Lombard report from mid-June, through which he warned of a “main disappointment” of investor hopes for a rebound of earnings subsequent yr. “In our forecasts this can be a direct results of the financial restoration from the dire Q1-Q2 (first quarter-second quarter) recession being solely gradual – a view that’s broadly shared by financial forecasters, together with the Fed, however ignored by buyers,” Dumas and his workforce wrote.U.S. stock market efficiency seems to have turn out to be disconnected from the financial system all through the pandemic, with hopes that recent cash might be injected into economies (because the UK. authorities introduced Tuesday, as an example) seemingly buoying sentiment. The S&P index has risen virtually 32% since hitting a low for the yr on March 23.The dislocation between market sentiment and information movement was no extra evident than Monday when the Dow climbed 580 factors, and the S&P 500 additionally gained, climbing 1.5%, regardless of a backdrop of rising coronavirus instances within the U.S. as states reopen, prompting some governors to stroll again or delay plans to chill out lockdown restrictions.TS Lombard’s Dumas, who claims to have forewarned of the 2008-2009 monetary crash, stated the present degree of stock valuations weren’t justified by the fact of the scenario — a worldwide pandemic through which greater than 10.three million folks have been contaminated and over 505,000 folks have died, in accordance with Johns Hopkins College.”For the present degree of costs to be justified, you’d need to have an excessive upside state of affairs turning out by way of the medical points of this entire factor,” like a vaccine that might be disseminated this yr, he stated, “and we merely do not count on that.””Basically, the market is presuming one thing alongside these traces. With out that, the earnings are going to be a disappointment and the market will come again right down to earth,” Dumas added.