When looking back at the market's gyrations over the past 3 months there would appear to have been three clear stages: Falling for a month from the highs reached in the middle of February, bouncing back for a month from the lows of 23 March, and since then some semblance of stability as the market moves in a broadly sideways direction (albeit with considerable underlying volatility).

In hindsight, probably the most surprising factor was that it took until mid-February for investors and some fund managers to recognise the potential damage caused by the global pandemic. Not all investors or funds of course, as some were clearly ahead of the curve, but plenty were not.

As investors are now painfully aware, the ASX200 fell almost 21% in March, and that figure would have been closer to -27% had the last week of the month not included the start of the recovery.

April's market recovery of almost 9% still saw the ASX 200 down 16% since the start of the year, and over 9% lower than 12 month ago. By comparison, absolute return funds listed on www.fundmonitors.com have fallen just over 8% year-to-date on average, and slightly under 3% over 12 months.

As we always point out, the term "average" is dangerous: YTD individual performances range from -80% to +25%, while over 12 months the figures are not that much different: -78% through to +30%. Drilling down into the details always reveals reality. Many of the funds that would have appeared in "Top 10" tables to 31 December last year are at the other (wrong) end of the scale by the end of April this year.

Equally, what the volatility has shown clearly is that diversification across funds and strategies is vital when looking to avoid downside risk and loss of capital. And not just diversification of names or managers - selecting funds with low correlation is vital, particularly in negative or volatile markets. So too is including funds which offer real downside protection - either through manager skill, or diversification of strategy.

During the bull market of the past few years some defensive funds and strategies have struggled to attract the attention of investors and the obsession for high headline returns. Finally, funds such as Gyrostat (12 months: +15%), ARK Global (12 months: +25%), and Levitas (12 months: +16%), to name just a few, are being recognised as true diversifiers in a well-balanced, low correlation portfolio of actively managed funds.

So where to from here?

While some managers consider the worst is over, many others, possibly along with the mood of many investors, are more cautious, concerned about a second leg down in the market, an extended recession, and/or a second wave of infections. Hedge Clippings remains in this camp, but either way, up or down, diversification across funds with low correlations to each other would seem appropriate in these uncertain times.

It seems as if, in Australia and New Zealand particularly, there are increasing expectations around the lifting of social distancing and lockdown restrictions. Whether it be the re-opening of schools or the resumption of limited sporting competitions, or it's simply the number of people with whom we can meet and greet - albeit at arm's length or more.

However, we have been incredibly lucky in Australia to have avoided the worst of COVID-19 - at least from a medical perspective. Oversees the infection rates and death tolls have been truly devastating, initially in Italy and Spain, and subsequently in the UK and the USA. With this in mind we spoke with two of our "regulars" this week, namely Monik Kotecha from Insync Fund Managers and Chris Watling from Longview Economics, to get their take on how companies, markets and economies might emerge once the lockdown is over.

Unfortunately, the quality of Zoom videos for both interviews wasn't what we would like it to have been so we will produce full transcripts of each interview and publish them as "Insights" articles early next week.

However, what was interesting was their different take on what lies ahead. Monik was looking at it through the prism of secular trends and the global "mega" companies in which Insync invest, while Chris Watling from Longview was naturally considering the global implications and the effects on consumers and small companies, or those with high levels of debt which might be more severely damaged by the pandemic.

Insync are optimistic that the pricing of companies in which they invest is not unreasonable. Longview are questioning the extraordinary bounce in global markets since the March lows, and what lies beyond Q3 when life might have returned to a near-normal state.

As Hedge Clippings views the future, while we can see the lockdown being eased both here and overseas, we can't see a return to normal until a cure or, failing that, an effective vaccination is found and deployed around the globe. There is also the significant risk of a second, and possibly third, wave of infections. It also seems that there is a huge amount that is not known about the disease, and unless and until the Chinese government agrees to release information about its source, this is likely to remain the case.

Come to think of it, the Chinese government's intransigence and reluctance to have any kind of open dialogue on the matter seems inevitable. While that is the case, the possibility of a further outbreak or other outbreaks of as yet unknown diseases remains high.

So, maybe for the foreseeable future at least, we live with the threat.