Covid, Cars, Costs and Crises
Perhaps we don’t want to remember, but amid today’s heightened uncertainty, it is easy to forget that five years ago, March 2020, global markets collapsed in a heap.
As country after country started locking down economies to slow the spread of Covid-19, investors sold out in a panic. The dash for cash was so intense that even the largest and most liquid market, the market for US Treasuries, temporarily seized up. Nobody knew what was happening next.
The intervention from monetary and fiscal policymakers was unprecedented, however, in keeping with the once-a-century (we hope) nature of the crisis. It meant that, even though the coronavirus would rage unchecked for months until vaccines and a measure of natural herd immunity started dampening its impact – and even then there were more waves and new variants – markets never retested the March 2020 low. It was the sharpest but shortest bear market ever.
Chart 1: S&P 500 bear markets, peak to trough declines
Source: LSEG Datastream
It also turned out to be a great buying opportunity, though it would have felt brave to do so at the time. Covid was still in the early stages of the devastation it would cause to lives and livelihoods. However, bear markets always bottom out well before the economy does.
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