It's the rally that investors love to hate. The market is up nearly 60% since March, but investors have hardly bought joyfully into the rally. In fact, many aren't buying much at all. "There's no irrational exuberance out there now," says Barry Ritholtz, CEO of research firm FusionIQ and author of "Bailout Nation." What gives?

Experts tell us that equity markets are forward-looking and typically move six to nine months ahead of the overall economy. Based on this timetable, and how far stocks have risen since March, we'd expect to see a dramatic economic turnaround sometime in 2010. Yet that doesn't seem to be in the cards. Government spending has helped stave off disaster, and companies have slashed costs to boost earnings. But these types of measures "last only for so long," says Michael Farr, president of Farr, Miller and Washington, an investment advisor in Washington, D.C. Consumer spending accounts for more than two-thirds of the economy. At some point, consumers will need to open their wallets again. With unemployment at nearly 10% and rising, few economists believe that will happen any time soon..

Stock valuations also suggest that the market might have gotten ahead of itself. The Standard & Poor's 500 index is currently trading around 19.5 times next year's expected earnings, Farr says. To justify these valuations, he notes, we'd need to see 28% earnings growth in 2010, and "that strikes us as aggressive."

Instead of reflecting hopes for an economic recovery, "the market is now unwinding the panic collapse from mid-September to March," Ritholtz says. The S&P 500 plunged more than 40% during that scary stretch. According to this argument, today's market is simply reverting to the mean. The market closed on Tuesday at 1,073. "At this point, we could just as easily end up at 12,000 or at 8,000," Ritholtz says.

What should investors do in this uncertain environment, when market movements seem particularly detached from the underlying economy? Farr advises sticking with companies that have strong balance sheets and lots of free cash flow. One name he likes is aviation parts maker Rockwell Collins (COL). Ritholtz advises investors to stay disciplined with dollar-cost averaging and stop-loss orders on stocks. It helps, he notes, "to stop obsessively following every twitch of economic data." Ritholtz's firm ditched its office televisions a few years ago, a purge he credits with sharpening his insights.