A likely summer of concerning COVID-19 Delta variant headlines sets the stage for an ugly stock market in the near-term, said Keith Lerner, Truist Advisory Services' chief markets strategist. 

"Our view is we're seeing another corrective period within a bull market trend," Lerner said in a note to clients after Monday's brutal start to trading. "While the Delta variant complicates the near-term picture, and is likely to lead to a continuation of sloppy trading through the seasonally-weak summer months, our base case remains that the primary trend over the next 12 months remains higher."

To be sure, Monday's session was quite sloppy as investors reassessed their risk appetite with growing COVID-19 infections globally at the hands of the Delta variant. 

Concerns mounted among investors that economies would be forced to close again due to rising infection, or at the very least recoveries from the depths of the pandemic would stall out soon as mobility restrictions are reimposed.

The Nasdaq (^IXIC) and S&P 500 (^GSPC) notched their biggest drop in nearly two months. Meanwhile, the benchmark 10-year note had its largest decline in over three months. The Dow Jones Industrial Average (^DJI) fell more than 900 points, marking its its worst drop since October 2020.

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The Dow Jones Transportation Index (^DJT) — which tracks the performance of economically sensitive names such as FedEx (FDX)— declined deeper into correction territory (down 10% from its highs). The small-cap Russell 2000 Index (^RUT) continued its run of relative underperformance, and is now down more than 6% over the past month. 

Even the often teflon stock known as Apple (AAPL) lost 3%.

Some of the lone winners in Monday's rout were the popular 2020 stay-at-home trades — for instance, Peloton (PTON) gained 8% and Etsy (ETSY) advanced 3.5%.

While markets tried to claw back some of the losses in the pre-market on Tuesday, nervous trading remains apparent. 

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"We're also now seeing some of the short-term complacency come out of the market, with hedging (put-call ratios) hitting a multi-month high and the Volatility Index also at a multi-month high," Lerner points out.

Adds Lerner, "The Delta variant likely delays and complicates some U.S. reopening activities on the margin, which minimally shaves down economic growth in the third quarter, though we expect growth to remain within our range of 6.2% to 7.3% year-over-year for 2021."

For a market that is still trading at near record valuations, it would appear more complacency needs to be beaten out of stocks in light of the resurgent virus. What we are talking about here isn't a potential rout in markets as seen at the height of the pandemic in early 2020, but a reassessment of risk as investors realize the pandemic is far from over.

Yahoo Finance's Javier David contributed to this story.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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