Bull and bear markets during the COVID-19 pandemic

The COVID-19 pandemic has caused severe disruption worldwide. We analyze the aggregate U.S. stock market during this period, including implications for both short and long-horizon investors. We identify bull and bear market regimes including their bull correction and bear rally compo-nents, demonstrate our model's performance in capturing periods of significant regime change, and provide weekly forecasts that improve risk management and investment decisions. An in-vestment strategy that uses out-of-sample forecasts for market states outperforms a buy and hold strategy during the pandemic by a wide margin, both in terms of annualized returns and Sharpe ratios.

Automated summary

The study analyzed the overall situation of the US stock market during the pandemic, providing weekly forecasts to improve risk management and investment decisions. An investment strategy that uses out-of-sample forecasts for market states significantly outperformed a buy and hold strategy during the pandemic.