Since big falls last week the local sharemarket has surged back by 16 per cent.
It's now off just 18 per cent since its last peak in February, but that does not mean we are through the bear market, says Pie Funds chief executive Mike Taylor.
It was important not to assume big swings and rallies mean we've reached a turning point, he told MarketWatch.
"Nobody rings a bell at the bottom."
• Coronavirus: New investors leaping at opportunity to buy cheap shares
• Market Watch: How should investors deal with the coronavirus correction?
• Coronavirus shock: NZ investors lost $1.5b today as shares tumble around the world
• Covid 19 coronavirus: All your KiwiSaver questions answered
We should expect to see much more volatility over the coming months, he said.
"When you're in a bear market you do get these furious rallies as we've seen in the past couple of days. It's important not to get too caught up in that," he said.
For long-term investors the best approach was to put a little bit of money into the market "on those very, very bad days".
"Sort of an averaging in process," he said. "Because we just don't know where the end is."
It was important to accept that we were now in a historic market event.
"As investors we have so much history to look back on and say: market crashes, recession, even depressions do happen," Taylor said.
"And we can't be naive as investors to think that they won't happen to us in our investment times scales."
There was always an expectation that the next crisis was coming but almost no one had picked a pandemic of this scale.
"When that emerged last January our investment team came up with an idea as to the implications … we had three base case scenarios and we had to quickly move to worst-case scenarios from the middle of February."
Conditions like the lockdown of citizens in their homes were so unprecedented that it was hard for investors to understand what that all meant.
"How is that going to affect consumer behaviour, how long will it last? Everything's really guesswork at this stage."
However, the market was starting to indicate who the winners and losers might be…
It quickly became clear the losers were those in the worst affected sectors like travel and tourism, extending through to airlines.
"You've got the oil industry which it has its own separate crisis going on as well, with a
The oil industry has been hit with a double whammy due to a political showdown, with big producers Russia and Saudi Arabia refusing to cut production.
But already there were some clear winners, Taylor said.
Primarily they were those in the relatively stable food sector and the technology space as use of web services skyrockets.
So companies with video conferencing platforms like Zoom and Microsoft were in good shape.
"We've seen positions in our portfolio such as Zoom and Microsoft do particularly well," Taylor said. "Zoom is up about 50 per cent in the past four weeks."
Microsoft was holding steady despite the big falls on Wall Street.
The tech-heavy Nasdaq index was the best performing of all global markets, Taylor said.
It was down about 13 per cent. Others, like Australia's ASX, which had a lot of banks and a lot of mining companies, had been hit very hard.
Broadly though banks and credit markets were bearing up, which was a good sign.
"Every time we think about what central banks can do, it's ripping up the rule book," he said.
"In the last week we've seen [the US Federal Reserve] go again and say, not only will they buy government bonds, they'll buy mortgage-backed securities, corporate bonds and make loans to corporates."
In the past few weeks the Fed had bought something like 5 per cent of the entire market.
"It's just phenomenal but what they have done is provide financial stability," Taylor said.
From here markets needed to be viewed in context of what will be very different economic conditions, both globally and in New Zealand.
"I've seen reports of unemployment in the US going as high as 30 per cent [out of St Louis Federal Reserve]. Who knows, it will certainly be a lot higher than where it was at about 4 per cent."
New Zealand would have to live with a much more domestically focused economy.
"We've got no real idea of when tourists will start to return, possibly not even until next year. In which case we'll be a very domestic-focused economy with significant restrictions on our international trade."
Governments would have to take on massive amounts of debt to get through the crisis, although there was plenty of precedent for that, Taylor said.
"If you look at the UK Government debt-to-GDP level they've got data back to the Napoleonic Wars, where it rose to about 250 per cent."
It fell away going into World War I then spiked again.
"Then after the Second World War it was up around 250 per cent, falling over the next 60 or 70 years," he said.
"It spiked again in the GFC to over 100 per cent and now probably will again, with what is going to be required in next 12 or 18 months, we could see government debt-to-GDP levels for the UK back above 250 per cent again."
New Zealand, by comparison, went into the pandemic with debt to GDP at around 19 per cent. That is expected to spike to above 50 per cent.
It was important, said Taylor, to look at history and remember that the world will keep turning.
"It's human nature that we find a way through," he said. "We'll find a way through this."
- MarketWatch is produced with support from Pie Funds.