When the markets were tumbling in late February and March, many investors will have had a nasty case of the ‘what ifs’.

If only I’d sold earlier. If only I’d had a better-balanced portfolio. If only I’d put aside a bigger cash buffer so I could benefit from lower prices.

Life does not always give us a second chance. But the stock market can do. Look back at the charts of previous bear markets and you will often see an initial rally to close to previous highs - just like today’s. Investors really do sometimes get a second bite of the cherry.

So, what are you going to do this time around?

It’s worth remembering what things felt like in February. Markets had enjoyed a year of strong gains but interest rate cuts from the Fed in 2019 and an easing in trade war fears had persuaded investors that the long expansion could continue for a while yet. The spread of Covid-19 from China to Europe put paid to that.

Three months on and the backdrop is very different. No-one is under any illusion that we face anything other than a big recession and a body blow to the labour market. There is a real fear that a second wave of infections could see economically-damaging lock-downs resume. This Friday, the US unemployment rate might hit 20%.

So why is the stock market almost back to where it was in February, in some cases? The S&P 500 index is more than a third above its low and even the FTSE 100, battling with one of the world’s worst death rates and renewed Brexit fears, is 25% higher.

The answer is very simple. Massive stimulus from both governments and central banks has persuaded investors that the pain will be short-lived. A rapid recovery in the economy has been priced into the stock market.

Actually, the reality is a bit more nuanced than this. Look beneath the surface of the stock market rally and you will see a big divergence between the sectors that are perceived to be pandemic beneficiaries (technology and healthcare) and those which are obviously victims of Covid (leisure, travel, property, retail).

The differences are playing out at the country level, too. The US is big in technology, the UK is not. Guess which has done better over the past couple of months?
So, it is probably less than helpful to think solely in terms of being in or out of the market. Exactly what you are invested in matters too.

But that said, there is some merit in thinking in terms of probabilities. Given the mis-match between Wall Street and Main Street, is there a greater chance of the stock market being 15% higher or 15% lower in six months’ time. I would say the latter.

But before anyone takes that as a reason to reduce their exposure to the market, ask yourself this: how confident are you that, having sold you will know when to buy back in again? How did it feel in late March when the markets turned and started to head higher? My recollection is that it felt pretty awful and the massive government and central bank response looked like a sign of how bad things were and not at all like a huge buy signal.

The second bite of the cherry, then, is not necessarily any easier than the first one that we all missed. It still presents us with a long list of unanswered and unanswerable questions.

My recommendation, therefore, is not so very different to what it always is: be diversified; if you are still saving then do so in a steady, regular fashion; and keep a bit of dry powder so that if there is another correction then you can take the edge off it by adding to your holdings at lower levels.

If you think you were not quite as well prepared as you might have been three months ago, take advantage of this second bite of the cherry. We’re lucky to have been offered it.

Read more news and insights

Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.  Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.