Market Reactions to COVID-19

A review of Q1 2020 as seen in the CME Market Sentiment Meter
By Anish R. Verma, Andrew Milne

The COVID-19 pandemic had a notable effect on the eight futures and options products tracked by 1QBit’s CME Market Sentiment Meter. In some markets, such as U.S. equity index futures and U.S. interest rate futures, there were rapid increases in daily futures volumes as prices changed and traders managed their evolving risk. The peaks in daily volume were followed by diminishments that varied from market to market, as well as changes in the volumes and positions observed in the corresponding options markets. The CME Market Sentiment Meter reported transitions from the Balanced state to the Anxious state in all products except soybeans and natural gas. The Anxious state is associated with an expectation of larger price movements, which were observed in the markets. In addition, it was seen that forward-looking activity moved from futures to options at a different rate for each product, and that market sentiment took time to become established.