CMC Markets chief market strategist Michael McCarthy said the share market has made a clear bounce back but investors should remain vigilant.
"The volatility we're seeing shows that markets are not out of the woods yet, so while we might be seeing sunshine today, the potential for rain is there," McCarthy said.
After the Australian market on Tuesday suffered its biggest one-day fall since September, 2015, wiping around A$66b from stocks in a day, on Wall Street overnight the S&P500 ended a wild session up 1.7 per cent at 2,695.14 points and the Dow Jones Industrial Average ended 2.3 per cent higher at 24,912.77.
Having ended 2017 at 8,398.08, the NZX50 has now dropped 3.7 percent in 2018. However, it hit a record 8,455.55 on Jan. 5 and has booked consecutive gains for the past 13 months, meaning it's up 14 percent from this time a year ago when it closed at 7067.05.
"We've gone through a period of no volatility at all, so the daily movements have been minuscule in terms of percentages. We've now had this trip up and things are unwinding a bit," said Craig Stent, executive director and head of equities at Harbour Asset Management. "We have had a good run, we had a good year last year - it's not just a straight line up all the time.
"The bond yields have moved up, and when that happens you can see a bit of a pause in equity markets," Stent said. "It's not like anyone is really expecting a recession. Global data and economic activity are still pretty strong, but we are seeing an unwind of quantitative easing and gradual increase in interest rates globally. We're probably not going to see that locally because CPI is still contained and the Reserve Bank is in no rush to raise rates here."
Matt Goodson, managing director at Salt Funds Management, advised taking a longer-term view at the market rather than focusing on short-term losses.
"To put it into context, the US market is only back to where it was in mid-December," he said.
