What is a crisis? Every crisis is different, and can be defined by both the length and depth of the crisis event. From this perspective, sustained and substantial periods of losses can be classified as a crisis, while short-term market reversals can be classified as a correction.

During the current pandemic caused by the coronavirus (COVID–19), we must ask two questions: (1) what is the core risk we might be exposed to? and (2) what systems if any might collapse as a result of it?

What does the data say? This is all speculation, and as a quant, I don’t like to speculate. I like to analyze. Here is what the market is telling us.

  • (1) Uncertainty Magnified: We don’t know what is going on
  • (2) The Market Smells a Skunk: Cross-asset trends are consistent with past crisis periods
  • (3) The Search Begins for Crisis Alpha: Momentum profits from coordinated moves