The ASX 200 just had its best month ever, up 8.8%. The rise in April, together with the last week of March has the Australian market up 21.5% from the low that was made on 23 March. In some terminology that might constitute a new bull market – though it may not yet feel like it since Australian shares are still 23% below the high point in February.

The fact that the ASX 200 just had the best month in in 28 years, (that specific index commenced in May 1992) illustrates how financial markets tend to price to where we might be in 6 to 12 months, rather than where we are right now. Who would have thought we could see this in the midst of the biggest ever spike in unemployment.

The month of April saw the release of all manner of dire economic data – none more dire than the news that claims for unemployment benefits have topped 30 million in the USA since mid March. Yet in spite of that, the S&P 500 index has risen by 12.7% in April, and a total of 30% in the 27 trading days since 23 March.

These strong market moves were in a large part due to the fast moving government fiscal responses. However, we also need to recognise the fact that the normal alternative to equities – government bonds – bear almost a guarantee of inflation adjusted losses if held to maturity. This means that bonds appear very unattractive compared to previous share market downturns, and this may also be a big factor in shaping investors responses in this downturn. Investors are virtually forced to take on risk if they wish to make some kind of return that exceeds inflation.

What the month of April has reinforced is that market bottoms are usually made when the outlook is the most pessimistic and gloomy. Similarly market tops are made when economic outlooks are rosy. The economic reality is that we will no doubt have more gloom to come, however there appears to be reasonable hope that our freedom to work and move about may be getting back to normal soon.