We are in the middle of the first anniversary of the Covid-19 market crash of last year. What happened then and after is an extraordinary story in the history of financial markets. What does it tell us about how markets behave, and misbehave? Some of the lessons are old ones that have been repeated. But some developments are new, unique to our times.
Having carried on rising through mid-February, in blissful ignorance of the economic threat posed by Covid-19 – which had by then started to go global and had already reached American shores – financial markets finally woke up to reality in the third week of February. Between Feb 19 and March 23 last year, the S&P 500 index crashed 33.7 per cent – the fastest-ever fall from record levels. The Straits Times Index (STI) also collapsed over roughly the same period, by 24 per cent.
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