US governors are trying to carefully navigate reopening plans to salvage as many businesses as possible, while several states continue to struggle containing the coronavirus spread. New York City, once the epicenter of the coronavirus pandemic in the US, enters its phase 2 reopening on Monday, with as many as 300,000 employees expected to return to their jobs. In the UK, PM Boris Johnson will push for an easing of the two-meter social distancing rule if he can get the support from health experts.

The one-way trade of buying risky assets might be over and volatility should remain elevated since the US economic recovery is not accompanied with a stronger rebound in the labor market. Adding to the uncertainty are the current virus resurgence concerns, what to expect in the fall, end of month volatility from the rebalancing of the S&P and Russell indexes, and a wrath of geopolitical risks.

Right now, the Fed has the greenlight to keep deficits on an unsustainable path, but that will only become an issue once the economy improves. It is amazing how irrational the risk-on rally has been for global equities as the US sees the virus continues its spread across the country and as a second wave hits Beijing, and concerns of a resurgence could trigger more restrictions and cripple consumer confidence. Financial markets are also constantly fluctuating over every vaccine/treatment update. The base case remains that a vaccine will be found this year, with high hopes on a few that will have phase 3 vaccine trials starting this summer. Market volatility should remain elevated throughout this summer.