There is a daily drip-feed of bad news but the rally rolls on despite the risks from US-China trade tensions and the explosion of violence on US streets.

The kevlar-coated nature of the rally is impressive. Capital allocators have clearly decided the nascent prospects for global recovery is the signal, while the death and mayhem that pepper television screens is mere noise.
But then again, the signal in the form of massive central and government stimulus has been amped up to a Spinal Tap worthy 11 out of 10.
For a generation of “don’t fight the Fed” fund managers, the $US3 trillion expansion of the central bank’s balance sheet since February to $US7 trillion, combined with $US3 trillion of fiscal stimulus, provides all the courage they need to bet on an economic recovery and an eventual rebound in earnings.
While the smart money may be beating on a return to normalcy, the epidemic has undoubtedly exposed fault lines that will complicate the return to normality.
There are a couple of clear risks to the bullish market momentum.
First, relations between the US and China are on the slide and will get worse.
Reports of Beijing ordering its big grain traders to halt purchases of US agricultural commodities is another reminder of the internecine nature of a trade relationship strained by tough talk over the flashpoint in Hong Kong.
China’s plans to implement tough new national security laws have been viewed by Washington as the coup de grace to Hong Kong’s autonomy.
Threats to take away Hong Kong’s special trade status builds on displeasure about Beijing’s tardiness in delivering on its phase one trade deal pledges and a host of simmering tensions over cyber security and military expansionism.
November’s presidential election will only serve to amplify strains in the US-China relationship.
Beijing should prepare for a daily tweet storm as President Donald Trump redirects attention away from the economic, healthcare and political crisis that will stalk him in the final stanza of his first and maybe last term.
The risk for Australian investors is President Trump’s attempts to play international wedge politics with his proposal for an expanded G10 meeting.
The new grouping would include Australia, but exclude China our largest trading partner.
Playing ball would not only provide an official imprimatur on the trivialising of the world’s second largest economy in global economic relations, but also risk antagonising Beijing at a time when Australia is in the diplomatic deep freeze.
The second risk is the US protests may derail the prospective recovery in the world’s largest economy.
Mass gatherings of protesters elevate the risk of a second wave of COVID-19 cases in a country that has shown itself ill equipped to handle the pandemic.
The wanton looting and destruction will handicap the ability of many businesses to reopen their doors as they had planned, while also threatening the livelihoods of workers at those businesses.
The spasm of violence and civil disorder risks lowering the trajectory of recovery in an economy that will bear the scars for years to come.
The Congressional Budget Office forecasts the US economy may be $US15.7 trillion ($23 trillion) smaller over the next decade than it otherwise would have been due to coronavirus if Congress does not mitigate the damage.
But maybe that’s the end game that investors are betting on: the bigger the threats to growth, the bigger the next lick of stimulus, and the bigger the next leg up in the market.