A healthy pause that refreshes or a warning sign of a much more consequential dip down the road? This is the question on investors’ minds as markets recover from an early-year dip in which portfolios lost money on both stocks and government bonds that are usually seen as “risk-free”. 

The answer is unusually complex, involving uncertainties over the “top down” view of central bank policy and market psychology. Fortunately, there is greater clarity on “bottom-up” factors that drive the selection of individual investments.

In a volatile start for 2021, the previously high-flying Nasdaq lost more than 10 per cent between February 12 and March 8 before bouncing back sharply. In the process, it underperformed the Dow Jones Industrial Average by an eye-popping 12 percentage points. The prices of government bonds — which move in the opposite direction to those of stocks — also fell, adding to investors’ woes.