It was also a time when the Australian stock market had suffered its worst trading day since the 1987 crash.

Basically, a flood of panicked investors hit the "sell" button at the same time on March 16, 2020.

They finally decided that COVID-19 was a serious problem that wouldn't "disappear" any time soon (despite US president Donald Trump's insistence at the time).

That caused the market to wipe out all its gains from the past four years (in a single day). The ASX 200 plunged 9.7 per cent, which worked out to be $160 billion.

Newspapers were using terms like "bloodbath", "mayhem" and "carnage" to describe the extent of fear being felt across every share market in the world.

Luckily for Ms Park, who manages a cafe in Sydney's inner west (among four other part-time jobs), the market didn't have much further to drop, in hindsight.

"My housemate works in finance, and he said it was a great idea to start investing now," she said.

"I heard that even if you lose everything in the share market, that's not the worst thing to worry about given the world is collapsing."

She wanted to invest as ethically as possible but didn't want to be "bogged down by research".

So Ms Park decided to buy shares in banks, the hard-hit travel sector, telcos and buy-now, pay-later (BNPL) companies. But she refused to buy oil and alcohol stocks as she considers them to be "very obviously evil".

It's fair to say the fledgling investor has made a killing on the market.

Ms Park said her investments had skyrocketed (by more than 50 per cent) since then — far better than how most professional investors did.

'FOMO' and 'TINA' drive rebound

Many economists have called the global coronavirus recession the worst economic downturn since the Great Depression (in the 1930s).

But nobody could have predicted what happened next — particularly given the extreme uncertainty, rapidly escalating death toll, and unprecedented mass lockdowns (domestically and across international borders).

Just a month earlier, massive bouts of investor exuberance had pushed the Australian market to a record high of 7,197 points (on February 20).

The next few weeks turned out to be a see-saw of erratic trading behaviour:

Global markets started to tank as investors worried about the economic devastation and surging unemployment the pandemic would cause.

But then other investors would swoop in the next day to hunt for "bargains", and drive a massive rebound. That see-saw pattern continued for the next few weeks.

Things became more serious when Mr Trump finally confirmed on Friday, March 13, 2020 that the pandemic was worse than he initially claimed, when he imposed a travel ban on Europeans who wanted to enter the United States.

Investor confidence essentially fell off a cliff. Wall Street's industrial index, the Dow Jones, experienced its worst day in 33 years — down 2,353 points (or 10%) in a matter of hours.

The local share market followed suit on Monday (March 16). The ASX 200 suffered its worst day ever (it was created in the year 2000), while the All Ords had its biggest one-day drop since 1987.

By then, the Australian market had entered into a bear market (as it had plunged 30 per cent from its record high just three weeks earlier).

Oil prices also took a dive and briefly fell into negative territory (which meant some traders were paying others to get rid of that stuff), as fewer people were driving and international flights had almost entirely ground to a halt.

However, the bear market lasted just 11 weeks — as record numbers of amateur investors (and bargain-seeking professional investors) flooded the market for "buying opportunities".

The Australian market is now trading near its highest level in a year.

After all, governments across the world had pumped stimulus worth trillions of dollars into the economy (in the form of employment subsidies like JobKeeper and JobSeeker, along with infrastructure spending).

Central banks also took drastic measures by slashing interest rates to zero (or even further into negative territory).

Australia's Reserve Bank went into uncharted territory when it decided to buy $200 billion worth of government bonds. It's also known as quantitative easing, or digital "money printing".

Analysts say the market enthusiasm can be summed up by optimism that COVID vaccines will save the day — as well as two acronyms.

One of them is FOMO (fear of missing out).

Since a lot of people had noticed their friends making easy a lot of easy money from the flood of cheap money in the market.

The other is TINA (there is no alternative).

With interest rates at record lows, many investors feel there is no point holding their cash in savings accounts — so they may as well punt on the share market for any chance of earning a return.

Since its pandemic-trough on March 23, the Australian market has rebounded sharply by 49% (from its low point of 4,546 points).

It has done better than other markets (particularly the UK, which is up by a third).

But the ASX pales in comparison to the Dow Jones, which has surged by skyrocketed by 76 per cent (to its highest level ever).

The US market has been driven, in particular, by a record $5.1 trillion worth of stimulus, which amounts to 23 per cent of America's GDP over two years, according to data from AMP Capital.

No market index has performed better than the tech-heavy Nasdaq Composite, which has practically doubled since late March.

That was primarily due to insatiable demand for "stay at home winners" like Facebook, Amazon, Apple, Netflix, Google, Microsoft and Zoom as locked-down consumers were increasingly forced to shop and communicate with each other online.

'Bizarre' optimism amid 'Cinderella' market:

Even veteran fund managers like Geoff Wilson (who has been in the game for more than 40 years) were perplexed by the huge disconnect between the market optimism and economic turmoil.

"We were of the view that the bear market would last longer than it actually did," Mr Wilson told the ABC.

"After the longest bull market ever in the US, you'd assume the bear market would have lasted longer. But to have the shortest bear market ever was quite bizarre."

In January last year, Mr Wilson felt the market was getting incredibly "frothy", so he sold a large chunk of his shares — which lifted his cash holdings to around 25 per cent (when the RBA's overnight interest rate was around 0.75 per cent).

It turned out to be a wise choice as he got out of some investments before their market value tanked in the COVID sell-off.

He said that at the height of the pandemic one of his funds (WAM Capital) moved to "43% cash very quickly".

But given the stronger than expected rebound (in the economy and share market), his fund went on a shopping spree to buy shares at distressed prices.

Now his Capital fund is holding just 2 to 3 per cent of its assets in cash.

"What worries me is that a lot of retail investors have been investing in this market ... and whether they'll be nimble to get out before there's a significant adjustment," he said.

"It's very hard to pick when the top is, and there's no doubt there are excessive signs."

"Speculative frenzy"

Another star investor, Hamish Douglass, is also worried things might end badly for some investors caught up in the "Speculative frenzy".

"These things tend to come to an abrupt halt, but they can go on for very long periods of time," said Mr Douglass, the chairman and founder of Magellan Financial.

"There will be major corrections in some of the most speculative ends of the market."

He also explained the risks of not "cashing out" soon enough (for certain assets) by paraphrasing some useful advice from America's legendary stock picker Warren Buffett — which was delivered back in 2000, when the dot-com bubble burst.

Warren Buffett (See video)

"Like Cinderella at the ball, everyone knows they got to leave the party at one minute before midnight — or they'll turn into pumpkin and mice," he said.

"The only problem with some of these assets at the moment is there are no clocks on the walls."

You've been warned.

Story By | David Chau