The surge in coronavirus cases across the Sun Belt is slowing the economic recovery in the United States.

That’s according to Goldman Sachs, which said this weekend it now expects a weaker rebound in the third quarter as local leaders impose fresh restrictions and consumers show signs of caution. The investment bank predicts the US economy will grow at an annualized rate of 25% in the three months ending in September, as opposed to 33%.

“The recent declines are minor compared to the collapse in activity in March and April, but they clearly indicate a break from the steady upward trend since mid-April,” chief economist Jan Hatzius told clients.

Goldman Sachs said it thinks spending on consumer services will “pause” in July and August.

“Over the last few weeks, the Covid situation in the US has worsened significantly to the point where the US is now a notable outlier among advanced economies,” the bank said.

But it refrained from making major changes to its outlook beyond the next few months, noting that other countries have been able to manage reopening their economies while limiting a rise in virus cases, and that behavioral and policy changes, like encouraging mask-wearing, could make a big difference.

“It is admittedly hard to know how well the US will adapt in coming weeks,” Goldman said. “But last week Texas joined the roughly half of US states that have implemented a mask mandate, indicating that state authorities are willing to making politically controversial policy changes to address the current health crisis.”

If investors are concerned, it’s not reflected in markets. China’s Shanghai Composite and Hong Kong’s Hang Seng entered bull market territory on Monday, with the former skyrocketing 5.7% for its best day since 2015. The move has been partially attributed to an article published by state media asserting that “cultivating a healthy bull market is important for creating new opportunities,” suggesting more government support for stocks.

Joining the party: The S&P 500 has rallied nearly 40% from its low on March 23, while Germany’s DAX has skyrocketed more than 50% since March 18. The FTSE 100 in London has risen more than 25% since March 23. Japan’s Nikkei 225 and South Korea’s Kospi are also up more than 20% from March lows.

“Sentiment remains bullish despite the many question marks around economic prospects over the medium and long term,” said Hussein Sayed, chief market strategist at FXTM.