U.S. stocks staged a rapid rebound last week, closing out a dismal January on a high note and building on earnings strength for several positive sessions. Though last week’s rally may have been welcome after a tumultuous month of trading, investors shouldn’t be so fast to take it as an indication that we are in the clear.

Investors “buying the dip” in stock prices may have their reasons:

• Despite reduced valuation multiples stemming from the Federal Reserve’s shift to tighter monetary policy, corporate earnings remain solid, on average. Certainly, fourth-quarter 2021 reports look strong. Among S&P 500 companies reporting so far, it appears that operating-profit margins for the index will hit yet more all-time highs, approaching 12.5%—fully 2 percentage points above the pre-pandemic 2019 peak.

• New data from the Bureau of Labor Statistics suggest that the fourth-quarter U.S. productivity rate, which measures hourly output per worker, increased at a staggering 6.6% annualized rate, beating economists’ consensus estimate of 3.9%, while unit labor costs rose only 0.3% versus a forecast of 1.0%.

But here’s the thing: As notable as those data are, they are backward-looking. More important for stock investing are future expectations for corporate sales growth and profits. And here, the story is less impressive. Consider the following:

• Corporate profitability forecasts are becoming less upbeat. The rate and degree of earnings surprises have normalized to their 30-year trend, not to mention that major tech bellwethers have begun to miss forecasts. And companies’ own estimates of future earnings are getting hazy, at a time when a measure of positive revisions by analysts to corporate profit estimates continues to decline from last year’s highs.

• The consumer spending mix between goods and services, though currently skewed heavily toward goods, is likely to normalize, especially if, as we expect, COVID disruptions finally crest. While many services businesses linked to travel, entertainment and dining may enjoy a rebound, this dynamic is apt to cause disappointments for others, such as the “work from home” winners that saw demand pulled forward during the pandemic.

• Lastly, costs for businesses remain elevated, but their impact on financial statements may be lagging. We are likely to see a cost side catch-up, with wages, logistics and energy prices all likely to rise meaningfully in the year ahead just as the rapid economic growth from 2021 may be naturally losing momentum.

Given such potential earnings headwinds, Morgan Stanley’s Global Investment Committee thinks the recent snapback in markets is premature. Investors would be ill-advised to resume passive investing in the market cap-weighted, tech-heavy indices.

True, today’s financial conditions are still among the loosest in history, and market liquidity remains near 30-year highs. But that may mask risks. The Fed has begun its policy tightening, but it has only begun. Periods of policy shifts are always volatile and episodic, and we expect this time to be especially so given the distance between current policy settings and the reality of economic growth and inflation.

But this environment is not without opportunities for investors. Consider taking profits from expensive tech and long-duration assets, keeping tax efficiency in mind. And look for stock-picking opportunities focused on defensives and cyclicals, companies with quality and undervalued cash flows.