Equity investors, needless to say, have faced a brutal market since February 20. But factor-based investors have experienced additional pain from factor returns.

Since the beginning of the equity sell-off in the last week of February, credit spreads have widened rapidly and significantly.

The well-publicized fall in equity markets may have overshadowed a potentially much more impactful risk from the corporate bond market – that of fallen angels.

We likely to have further to go in this downturn, and it could take a long time for the market to retrace its steps back to its January level.

Stress testing is a good way of estimating the impact of another stock-market downturn on other asset classes.

Last year we introduced the Qontigo ROOF Scores as a market sentiment indicator. Recently, it occurred to us that a similar indicator could be derived using sectors.

Indeed, the magnitudes of recent market swings have been substantial, and probably seemed even worse given the relatively low levels of volatility prior to February.

The STOXX USA 900 index fell about 6.5% from February 24 through 25, with other markets around the world seeing similar declines.