It’s a time of unrest in America, a period marked by nationwide protests against police brutality and advocacy for equality. It will almost certainly become a defining moment in the history of this nation, and while the protests have remained peaceful for the most part, the unrest in certain areas has led to rioting and looting.
With all this being said, it might surprise you to learn that the stock market and economy in general is on the upswing. In terms of the economy, the May job numbers were a fresh breath of air from the previous two months where layoffs outpaced added jobs. And while a misclassification error likely means the 13.3 percent unemployment rate was a tad higher, it’s still good news as the nation rebounds from the COVID-19 pandemic.
But the real surprise continues to be the surge on Wall Street and how the market is gradually gaining back the losses from its late-March low. In fact, the S&P has increased by about 5.6 percent since the death of George Floyd that sparked the national unrest.
With all this being said, you might be wondering why the market is still rising, even as unrest continues and many of the businesses that had planned to reopen are now not able to in certain areas due to looting. The answer is because the stock market is right now contingent on a successful economic reopening, and despite unrest, America’s businesses are largely back in order — or soon to be getting back in order.
Many economists point to the riots and looting that have taken place and – at least in a stock market sense – encourage you to think of them as natural disasters. For example, because the vast majority of protests and demonstrations have been peaceful, these incidents have a significant impact only on certain areas. That’s similar to how a tornado uproots a certain city or the impact a hurricane has on coastal areas.
And when you consider that these protests have yet to lead to a significant outbreak in new COVID-19 cases in the areas where they’ve been occurring, it’s perhaps more proof that the worst of the crisis is behind us.
The second quarter economic data is not going to be pretty. Many economists expect the U.S. economy to have shrunk by about 30 percent when the data all comes in, and understandably so. But economists also see an uptick in growth in the third and fourth quarters, respectively, as things get back into full swing. It’s largely the reason why the stock market continues its gradual ascent right now, and ideally will continue to climb as COVID-19 treatments become better and a vaccine inches closer to widespread distribution.
Remember, the stock market increasing is a sign of optimism about the economy – or in this sense, optimism about America’s reopening. It’s why the market continues to climb, even during a period of high tension.
