(June 19): Reports of fresh spikes in new Covid-19 cases — including in Beijing, China, where the outbreak had been largely stamped out after almost two months without any infections — triggered selling pressure on global stocks on worries of a second wave. In the US, states such as Texas, Florida and Arizona are also reporting a rising number of cases as economic activities restart.

These are the headlines of the moment. And they are causing renewed volatility — and big intraday swings — in markets (see Chart 1). The risk of a second wave is not unexpected. In fact, it has been extensively discussed and built into most forecast models.

Yet, despite the latest bout of volatility, markets have stayed very resilient. The strength and durability of the current rally continue to confound many professional market observers. Indeed, various reports suggest that asset managers, as a group, are still sitting on a comparatively high percentage of cash in money market funds and bank deposits. According to a recent Bank of America survey, 78% of global asset managers think the US stock market is overvalued.

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