“Unimaginable.” “Unprecedented.” “No big deal.” The COVID-19 pandemic led to a roller coaster ride for the financial markets in 2020. The S&P 500 dropped into bear market territory for the first time in over a decade, and large parts of the bond market simply stopped trading. Fast forward to the end of July — the US economy had just finished its worst quarter in history, and yet the S&P 500 was up on the year!
As risk professionals, we need to consider what lessons we should be taking away from 2020 — whether we focus on the heavy losses of March or the recovery that followed. We also need to consider whether there are other, non-economic impacts that we should examine, such as the radical changes in many business models that the pandemic brought about.