There is a saying in financial markets about the 'dead cat bounce': if you drop something, anything, from a sufficient height, it will bounce. It will be dead, but it will bounce.
In April, equity markets bounced from the lows they experienced in mid-March.
Only time will tell if this a dead cat bounce, but the height of the fall and speed of the recovery does suggest it may have certain deceased feline qualities about it.
Having fallen by 34% from its peak, the MSCI world index is now 28% higher than the lows seen in mid-March, taking it to a level last seen at the end of May 2019.
Effectively, this is saying that a global pandemic and the shutting down of a large proportion of the global economy has resulted in investors losing one year of global equity returns.
Of course, this story is different in different equity markets: in the UK investors have lost around four years of returns, European investors about 15 months of returns, US investors seven months of returns and investors in emerging markets about three years of returns.
Diversification is vital
These facts tell us a couple of things, firstly diversification is vital. UK investors with a home bias will have been hardest hit by the falls.
But it would be a mistake to think about this as superficially as only geography, that somehow the markets are thinking that some countries are expected to weather the storm better than others.
In our view, it is actually more a story about the sectoral breakdown of the respective indices - most large cap companies are fairly well diversified internationally already.
The FTSE All-share has a sectoral exposure of 25% to financials; 9% to oil and gas; 7% to basic materials (mining in particular) and 1% to technology.
Meanwhile the S&P 500 has a 26% exposure to technology; 15% to healthcare 11% to financials and just 6% to energy and resources.
These sectors have experienced very different fortunes over the last 2 months.
With the global economy in lockdown, demand for oil has fallen to such an extent that the price briefly turned negative with producers paying customers to take their product as there was nowhere left to store it.
This has had a predictable and significant effect on the share price of oil companies. The same is true to a lesser extent with non-oil commodities.