I can’t stop thinking about Disney. A few months ago $DIS looked unstoppable: content (movies, live sports, IP) and experiences (theme parks, cruises, merch) coming together in an impregnable positive feedback loop.

It’s hard to envisage an economic shock that would specifically target cruises, live sports, theme parks and movie theaters, while leaving (say) cable news and streaming largely untouched if not actually improved – yet the pandemic is precisely that.

Conversely, consider Amazon. It’s equally hard to envisage a shock that would specifically boost cloud & e-commerce & groceries, vs on-prem & physical retail & restaurants respectively – yet the pandemic is precisely that as well.

Putting this into equity quant terms, there appears to be a “pandemic factor”, analogous to other well-known equity market factors like value, or small-cap, or quality, volatility, or dividend yield.

Some firms like Disney have negative exposure to this factor, others like Amazon have positive exposure. The stock market as a whole currently has a negative exposure, which makes sense.

Since the market peak on Feb 19, the S&P 500 is down 14%, $DIS is down 22% and $AMZN is up 12%. That’s the pandemic factor at work!

If the world settles into an oscillatory “new normal” where the virus advances and retreats, lockdowns are imposed and lifted and re-imposed, travel rises and falls and so on, you would expect stocks to oscillate in sync, proportional to their factor exposure.

This of course makes the pandemic factor exactly the same as other market factors, which also ebb and flow. Sometimes small-caps are in fashion, sometimes large-caps. Sometimes investors chase growth, sometimes they want value.

And sometimes virus-resilient stocks will outperform virus-sensitive stocks, and sometimes the opposite will be true.

(The ideal company has business lines that get stronger in both sets of extremes – convexity or antifragility or resilience. There are not many ideal companies in the world.)