There is a big gap between what is happening on the streets in America’s cities and the American stock market has confounded lots of both professional and retail investors, this is nothing new.
Below is a overview of how similar frames of civil violence and political unrest have played out in the market throughout history, as follows;
In Y 1963, when President Kennedy was assassinated, the S&P 500 added nearly 20%.
In Y 1965, the year of the civil rights March in Selma, the S&P 500 gained more than 9%.
In Y 1967, the year of the Vietnam protests, the S&P 500 more than 20%.
In Y 1968, the year Dr. Martin Luther King Jr. was assassinated, the S&P 500 gained 8%.
In Y 1970, the year of the Asbury Park race riots, the benchmark index lost less than 1%.
In Y 1992, the year of the Los Angeles riots that erupted after Rodney King was beaten by police, the S&P 500 rose about 4.5%.
While stocks ended Y 2001 down 13%, they ended the 3 months following the 9/11 terror attacks up more than 1%.
In Y 2003, after protests erupted around the world over the Iraq War, the S&P 500 spiked 26%.
In Y 2005, after civil unrest in New Orleans following Hurricane Katrina, the S&P 500 gained 3%.
In Y 2011, the year of the Occupy Wall Street protests, the index broke even.
In Y 2014, the year that sparked the beginning of the Black Lives Matter movement after the Ferguson, MO protests, the S&P rose more than 11%.
Now, the S&P 500 is up 4.5% since protests over the death of George Floyd began on 26 May.
Financial markets have a history of looking beyond periods of social or political unrest, even when it seems impossible that stocks could be so divorced from world events.
In Y 1964, a really tense year in US history that saw several major events related to the Civil Rights movement and the beginning of student protests over the Vietnam War, the S&P 500 rallied 12% and the upward trend continued into Y 1965.
1968 known as the year that “shattered America” tells a similar story. That year, the Vietnam War escalated while the public began to oppose it, as did tensions with NKorea after a US surveillance ship was captured. 2 Memphis Tennessee sanitation workers were crushed by a garbage truck, setting off a major strike and fueled the Civil Rights movement. Student protests gained momentum. Both Dr. Martin Luther King and Robert F. Kennedy were assassinated. And after everything that happened, stocks in the S&P 500 rose 8%.
Company performance in the months following the worst of the C-19 coronavirus chaos investors ignore the distractions, and are focused on the V shaped economic recovery from the instant recession.
The Fed’s month old Beige Book report about the state of the economy, indicated that even though all 50 states are beginning to take their 1st steps toward reopening, most businesses were pessimistic about the pace of economic recovery, today we learned that was 180 degrees out of phase with the NFPs reporting 2.5-M jobs added in May, the economists were 10-M off!.
And last month, the IMF predicted that banks will suffer sharp declines in profits through 2025, and that “substantial action” will be needed to make up for earnings shortfalls caused by the C-19 coronavirus chaos, savvy professional investors have learned to take the IMF with a grain of salt.
So, always remember, take what the market gives and tune out the Noise!
Have a healthy weekend, Keep the Faith!