How has Covid-19 Affected Our Clients?
The COVID-19 crisis has been characterised by extremely volatile markets and extremely negative news coverage. Using all relevant Reuters news articles from January to June 2020, this column shows that a 12-topic model effectively tracks the evolution of crisis news flow. In the early stages of the crisis, markets frequently reacted to uninformative news. This dynamic underwent a structural break in mid-March, likely due to Fed interventions, after which markets became more ‘normal’. Investors, lacking early hard evidence on the effects of the crisis, interpreted many news stories as being informative about future pandemic outcomes, even though they were not.