COVID-19 Crash 2020

Between mid-February and 23 March 2020 the S&P 500 fell approximately 34% in 33 trading days — the fastest move from an all-time high into a bear market on record. The trigger was the global spread of COVID-19 and the unprecedented economic shutdowns imposed to slow it. Credit spreads widened sharply, oil futures briefly traded at negative prices in April, and several normally-deep markets (Treasury basis, agency MBS) experienced functional dislocations. The Federal Reserve responded within weeks with unlimited QE, emergency lending facilities and direct purchases of investment-grade and high-yield credit; Congress passed the CARES Act. The S&P 500 recovered its pre-crash high by August 2020, and a sustained rally extended into 2021.

• Long-dated US Treasuries — duration delivered exactly the diversifying offset it is supposed to, particularly in February-March 2020.
• Mega-cap technology and "stay-at-home" beneficiaries (cloud, e-commerce, video conferencing, biotech) — many printed all-time highs by late 2020.
• Gold rose meaningfully and made a new all-time nominal high in August 2020.
• Investors who rebalanced into equities in late March or maintained scheduled contributions captured the steepest part of the rebound.
• Cash held through the panic — even a modest allocation enabled rebalancing at the lows.

• Energy equities and oil-linked credit — collapsed alongside a real-economy demand shock and a brief Saudi-Russia price war.
• Travel-exposed industries: cruise lines, airlines, hotels, conferences and live entertainment.
• Commercial real estate exposed to office and retail, where occupancy and rent collection deteriorated.
• Short-volatility strategies and risk-parity portfolios that had to deleverage rapidly during the March volatility spike.
• High-yield bonds during the worst weeks (though most recovered as Fed credit facilities reopened the market).

• Speed of response from central banks and fiscal authorities now matters more than the depth of the initial shock for the loss path of a diversified portfolio.
• The "bear market" was over in roughly a month for index investors. Acting on the basis of headlines about deaths, lockdowns or earnings collapses would have been costly; the market priced and re-priced the entire shock inside that window.
• Within-equity dispersion was extreme. Sector and factor positioning explained more of 2020 returns than aggregate market exposure did.
• Liquidity in supposedly-deepest markets (US Treasuries, agency MBS) can break in a true panic; only Fed intervention restored functioning.