The economic re-opening is now well underway, with not long to wait now until restaurants and pubs open their doors once more across England. However, for markets, concerning signs of a resurgence in coronavirus cases mean we may have reached a turning point for risk assets.

Firstly, on the virus itself, numerous southern US states, which failed to properly arrest the initial wave of infections before lifting lockdown measures, are seeing rather worrying spikes in cases and hospitalisations. Confusingly, however, these states – Arizona, Texas, Florida to name but three – have yet to see a significant rise in fatalities. Of course, I am not an epidemiologist, though I am sure the experts are beavering away to work out why this is.

That being said, the rising number of cases is raising concern that we may see a return to stricter social distancing measures, though a second, blanket nationwide lockdown – in any developed market – appears highly unlikely. Nevertheless, we have already seen some businesses take matters into their own hands, with Apple recently announcing a round of store closures in virus hotspots. Furthermore, concern that the virus is once again spreading rapidly would severely dent consumer confidence, likely resulting in increased reluctance to venture outdoors and engage with the economy. Be it a lockdown, or individual actions from businesses and the general population, the economic impact would be broadly similar.

Taking this into account, it is not surprising that the market has recently rolled back some of the rather aggressive bets on the economic re-opening that had been in evidence. The rotation out of tech and into value has reversed, showing how investors are becoming a touch less bullish on the recovery prospects, and increasingly believing that our reliance on virtual services is here to stay.

Given this rotation, the tech-heavy Nasdaq continues to outperform peers, with the recent equity market rally being largely propelled by big tech. Furthermore, with the continued liquidity injections from global central banks, and investors continuing to expect further stimulus from the fiscal side as well, it will likely take a significant shift in the risk landscape for equities to see further downside.

That shift does, however, appear likely, with it difficult to envisage the market being able to continue ignoring the surge in US coronavirus cases, especially if the resurgence of the virus threatens – as it does – to slam the brakes on the already fragile economic recovery.

It seems that it is a question of when, rather than if, the market ‘catches down’ to the economic fundamentals, at which point one can expect a rather significant pullback in risk assets.