Equity markets have rebounded over the past month as unprecedented monetary and fiscal stimulus has helped to prop up global economies.
While the rally looks to be largely driven by extraordinary policy responses by governments and central banks worldwide rather than optimism about the end of the virus or strong corporate balance sheets, there have been some encouraging signs from European countries which have started to lift restrictions without a material rise in infections.
However, while the stimulus has been a welcome and necessary boost to economies and companies, it could lead to difficulties in future.
For the UK Government, it is very attractive to borrow money over the medium to long-term at record low rates, but it means considerably increasing the debt to GDP ratio: the UK is set for more than £2trn of debt by the end of 2020.
The UK is not an outlier on this and the debt will be manageable, but with greater debt in the system comes greater risk.
From a company perspective, however, one of the more positive elements is that leveraged companies are thinking more about the level of debt they hold.
Cyclical businesses are a good example of this. We have already seen a number of equity raises in the market with businesses trying to reduce their debt to EBITDA ratio to more sustainable levels and protect them against future shocks.
Similarly, a number of companies have cut or suspended their dividends, which - while difficult for income investors in the short term - could see more sustainable dividends paid over the long-term.
Arguably, some companies had been distributing too much money through dividends and not holding enough back as a safety net.
The crisis will force them to consider what they use dividends for and what are sustainable levels in future.
Against this uncertain backdrop it is important that UK equity investors consider how the long-term story for businesses has changed, if at all, once the crisis subsides.
For example, Greggs and Burberry - which have plenty of cash available on their balance sheets and little debt - are businesses that have downside risk over the short-term, but are well placed to be profitable again in future.
Colin Morton is portfolio manager of the Franklin UK Equity Income fund
• Crisis could lead to more sustainable dividend levels over the long term
• Companies with strong long-term outlooks have sold off sharply during the volatility
• Level of UK debt in the market adds risk for the economy
• Threat of the virus and potential second wave still overhangs