Amidst Unrest, US Markets Rally On

Despite the current state of mass protests and ongoing upheaval across the U.S., stocks, on the other hand, have continued to rally -- showing a sharp disconnect between markets, the economy, and public sentiment. The mass protests were held in numbers by Americans and citizens of other countries in response to the controversial case of racist and police involved death of George Floyd, in Minneapolis on Memorial Day (5/25) after a deli employee called the police to report George of buying cigarettes with a counterfeit $20 bill. Other than Floyd's incident, the protests are fueled by the case of Ahmaud Arbery, Breonna Taylor, and the long, unending list of people who have lost their lives unfairly. As mentioned previously, the unmistakable acts of racism in America add up into a snowball, fueling dissatisfaction of the system. The protests also invited 'looters' to arise, stealing goods from businesses and shops, with some cases even leading to destructions of several property. Contrary to the impact severed by the businesses destroyed, added with the long impact of the nationwide lockdown due to the COVID-19 pandemic - with USA being the country with most infected cases - the stock market has confusingly remained unwavering. On Monday (6/1), American TV personality and former hedge fund manager, Jim Cramer boldly claims that the market is blind to social justice. He added by stating, "At the end of the day, the market has no conscience. Investors are simply trying to make money, and that's why they're crowding into the stay-at-home economy stocks" and "because the stay-at-home economy just got a major extension for many investors [and] right or wrong, thoughtless or cerebral, it's worth exploiting."

The rally started with The Dow Jones Industrial Average picked up almost 92 points, followed by the Nasdaq Composite which moved 0.66% to 9,552.05, and The S&P 500 rose by 0.38% to 3,055.73. In addition, S&P also had its best 50-day run in history. This market rally happened because the stock market is moving higher on optimism about reopening the economy amid the coronavirus pandemic, unemployment, and violent upheaval over racial inequality that occurred just recently. “The market is a forward-looking mechanism. They see six months from now, nine months from now there will be more semblance of order. The economy will be coming back, and earnings will be coming back. Estimates have stopped going down,” said Steven DeSanctis, Jefferies equity strategist. According to Jim Cramer, each investor has a different outlook and reaction on the newest issues when it comes to the stock market. But in general, the market itself generally won’t react to social justice even though there’s now a younger generation that invests with their hearts as well as their heads. The reality is that the majority of people still pick stocks because they’re trying to make money.

Several interventions were done amid the rise of the stock markets primarily by the Federal Reserve (Fed). The actions were done to prevent or at the very least, ease businesses and other sectors affected by the novel coronavirus. According to New York Times, The Fed attempted to aid the economy by pumping $2.3 trillion over advanced programs done last March and it has gradually improved market conditions. Earlier on March, an emergency 0.5% cut to interest rates (Bank Rate) were made by The Fed in an attempt to reduce economic disruptions that took place. A decrease in interest rate will cause an increase in price of bonds that will lead to a positive stock market. ‘Rate Cuts’ is predetermined to buy stocks because the lower rates will draw attention to investors. This is the first time in history that The Fed bought short-term corporate debt and municipal bonds meaning that they will directly buy bonds issued by states and cities. According to Politico, the central bank proposes short-term debt because states and cities have seen a fall in revenue as businesses shutter due to the virus outbreak. Throughout history, the stock market has undergone multiple occurrences similar to the current unrest, including the assassination of John F. Kennedy, 1965 civil protests, and many more. As history repeats itself, in all those years the S&P 500 index still managed to have an annual growth ranging from 4% to 20%, restating how jarringly disconnected the financial market is to the world's geopolitical and social landscape, and how it turns a blind eye into social justice and public sentiment.

Sources:

Forbes

CNBC

The New York Times

What would you like to learn next week? Comment, Like, & Share!