Man FRM Early View

March 2020

Originally published on 02 April 2020


A biological shock, an economic shock, a financial shock. It does seem as if that is the order of causality. You have to go back a long way to find a big bad event that did not have some form of finance as a prime suspect. When it’s finance, it feels like a punishment meted out to everyone in society for the excessive financialisation of the economy, and some toxic combination of the fear, greed and stupidity of a small number of rich people. We remember the villains not the heroes. But this is different. Most importantly everyone knows who the heroes are this time. 

There is no need to rehearse the reasons why traditional markets performed as they did in response to a negative economic growth shock, though on this occasion it is interesting how long it took most asset managers to take the pandemic seriously. (The market consensus was, quite broadly, that we were in a reflationary upswing; the virus was barely more serious than seasonal ‘flu and dips in the equity market were there to be bought.) But we all got there in the end and no doubt this accentuated the sell off as it gathered pace into the second week.

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