The FTSE 100 fell over 2%, the German Dax by almost 3% and the Euro Stoxx 50 by around the same amount on July 20. There were also heavy losses on the main US indices. But it only took until Thursday for those losses to be recovered, as some investors took the opportunity to buy at cheaper prices after a period of record highs.
The quick rebound shows that there is still a level of underlying support for stocks. However, if the Covid-19 pandemic worsens to the point where social restrictions are required to stem the spread, that support may soon fall away.
Equities are priced to perfection, having been bought on expectations of rapid global economic growth, as the world reopens against a backdrop of accommodative central bank policy.
However, should this growth be stifled by another wave of the pandemic, there is little else to support the elevated prices of many stocks, particularly the cyclicals that depend the most on the reopening of society.
If these stocks begin to take a hammering again in the autumn, the impact on the primary market could be huge.
Banks are lining up a busy pipeline of new issues for September, trying to coax an investor base that is sceptical about initial public offerings after a mixed year to back more deals in the third and fourth quarter.
If those investors have taken losses, the likelihood of getting them to partake in risky listings is slim. To price deals, issuers may have to settle for wider discounts to their listed peers and valuations that they may find unappealing. There is already talk of such dynamics, even without a sell-off.
If the global vaccine roll-out keeps the virus at bay through the colder months, equity capital markets bankers will have a conducive backdrop against which to sell new deals.
But the brief tantrum at the beginning of last week shows that investors are keeping a close eye on virus numbers, and that they are ready to sell out of toppy stocks and take a profit if the pandemic takes a turn for the worse.
ECM bankers need to be prepared.