Aswath Damodaran’s Reflections on the COVID-19 Crisis: A Three-Act Drama

– Aswath Damodaran wanted to approach the COVID-19 crisis differently from previous market shocks.
– He kept a record of his thoughts and impressions in real time throughout the pandemic.
– Damodaran identified three stages of the crisis: the meltdown, the melt-up, and the recalibration.
– The meltdown occurred as the pandemic unfolded, leading to a global economic shutdown.
– The markets stabilized after the Federal Reserve implemented measures to support private lending.
– The equity markets eventually recovered and reached new heights by September 2020.
– The crisis reshaped the markets, with certain regions and sectors being more affected than others.
– Venture capital remained active during the pandemic, with an all-time high for IPOs in the third quarter of 2020.
– The pandemic also changed the composition of investors, with the masses playing a larger role.
– Six risk-on companies (Facebook, Amazon, Apple, Netflix, Google, and Microsoft) drove much of the market’s recovery.
– Damodaran emphasized the importance of these companies in the overall performance of US equities.
– Personal opinion: Damodaran’s reflections provide valuable insights into the dynamics of the COVID-19 crisis and its impact on the financial markets.