Why stocks can keep soaring from record levels, regardless of how much more support the Fed offers, according to a Wall Street chief strategist

• David Zervos, the chief market strategist at Jefferies, told CNBC on Monday the dollar's rise alongside the stock rally indicates that a real economic recovery independent of the Fed is underway.
• The S&P 500 rose to a record intraday high on Monday, while the dollar index jumped as much as 0.8%, gaining against the euro, Swiss franc, and Japanese yen.
• "When you get a real recovery, the dollar starts to go up when stocks go up, as people start expecting higher real returns on capital in the economy," Zervos said.
• He added: "As opposed to the Fed being a driver, and driving real rates down, and the dollar weakening, and that pushing stocks up."
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While many investors have attributed the stock market's ongoing rally off multiyear pandemic lows to the Federal Reserve's low-interest-rate policy, David Zervos of Jefferies told CNBC he sees a real economic recovery ahead that may not hinge on the central bank's support. That would, in turn, translate to further stock gains.

The chief market strategist explained his view, which is built around the dollar's movement relative to stocks. As major US indexes soared to record highs on Monday after positive vaccine news, the dollar also rose.

"When you get a real recovery, the dollar starts to go up when stocks go up, as people start expecting higher real returns on capital in the economy," Zervos said, "As opposed to the Fed being a driver, and driving real rates down, and the dollar weakening, and that pushing stocks up."

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Zervos said you can see this "handoff from the Fed to the real economy" through the currency markets, and through the weakness in Gold.

The dollar index jumped up 0.8% on Monday, gaining against the euro, Swiss franc, and the Japanese yen. The gain marks an increase from a more than two-month low seen on Friday. Meanwhile, the S&P 500 rose as much as 3.9%, to an intraday record high of 3,645.99 as gold fell more than 4%.

"I think that's an important thing to watch today and very encouraging that we're really turning the corner," Zervos said about the relationship between stocks and the US dollar.

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