By Caitlin McCabe
U.S. stocks have been on a tear, with investors seemingly
looking past everything from rising tensions with China to the toll
of a pandemic that has brought the global economy to a
This week, as thousands of protesters flooded U.S. streets, the
stock market behaved no differently: The S&P 500 has risen in
three of the past four days, gaining 2.2% so far this week.
The optimistic trajectory of the market sharply contrasts with
the civil unrest that has gripped the nation since George Floyd, a
black man, was killed May 25 in police custody. Since the
circulation of the initial video of his death--which captured a
white Minneapolis police officer kneeling on Mr. Floyd's neck as he
pleaded that he couldn't breathe--protests against police brutality
and killings of unarmed black Americans have emerged across the
The breadth of the protests--as well as the government responses
that they have elicited--mark a level of civil unrest that some say
hasn't been seen in decades.
Dozens of cities implemented curfews this week. The National
Guard reached historic levels of deployment. Marches sprouted in
normally quiet small towns. Buildings and cars were set ablaze, and
interactions between protesters and police escalated in some
Nevertheless, stocks climbed higher, with companies including
UnitedHealth Group Inc., Home Depot Inc. and Slack Technologies
Inc. setting new highs during the week. The S&P 500 is down
just 3.7% for the year, while the Nasdaq Composite is just shy of a
History suggests the market tends to be unaffected by periods of
civil unrest, natural disasters or other similar events--especially
if investors perceive that they show no signs of hurting the
broader economy, analysts and traders say.
"There's a heck of a lot that the market is seemingly ignoring
right now, in addition to the protests," said Liz Ann Sonders,
chief investment strategist at Charles Schwab & Co. "But if you
look back at the history of large-scale civil unrest...the market
tended to sort of look through that. You didn't tend to see
significant weakness either while it was happening or in the
Take, for example, 1968--a year so volatile that Smithsonian
Magazine dubbed it "The Year that Shattered America." Despite low
unemployment and relatively low gas prices, tensions were building
across the country. The U.S. was in the midst of the Vietnam War,
inflation was rising and a viral influenza killed roughly 100,000
Americans. Racial tensions had been building for years by the time
Martin Luther King Jr. was assassinated that April. His death set
off a wave of nationwide rebellion.
Yet in the week following his death--as the nation was enveloped
in protest--the S&P 500 rose 2.9%, according to Dow Jones
Market Data. One month after his assassination, the benchmark index
was up 5.1%. It gained 7.7% that year, defying all of the turmoil
that the U.S. faced.
The protests that followed Mr. King's death were similar to the
unrest happening across the U.S. today, said Heather Ann Thompson,
a history professor at the University of Michigan who has studied
policing and racial conflict.
"People had already been begging, pleading, protesting and
sitting down nonviolently...so '68 was significant as this moment
where it all comes to a head after Kings' assassination," Ms.
Thompson said. She said the death of Mr. Floyd is a similar
flashpoint after years of deaths of unarmed black Americans.
Similarly, the S&P 500 rallied 1.2% in the week after a jury
in April 1992 found Los Angeles police officers not guilty of
assault against Rodney King, a black man. A widely viewed video
from a bystander had shown the officers beating Mr. King, leading
to days of rioting in Los Angeles after the verdict. Still, the
S&P 500 was up 0.8% one month after the jury's decision.
The benchmark index also rallied in the week and month after the
August 2014 death of Michael Brown, an unarmed black teenager, who
was shot by a white police officer in Ferguson, Mo. His death also
led to sustained protest and new conversations about the dynamics
between police and black Americans.
"The stock market is not something that necessarily goes up or
down with the mood of the country," said Thomas Lee, co-founder and
head of research at Fundstrat Global Advisors.
Some investors say the current rally highlights the
forward-looking nature of stocks. Rather than focusing on grim
economic data and widespread civil unrest, traders are instead
betting on the recovery of the economy and corporate
earnings--especially as drugmakers have given encouraging signs
about their coronavirus vaccine progress. Massive intervention by
the Federal Reserve, as well as anticipated additional stimulus
measures from the U.S. government, has also buoyed markets.
Critics, in contrast, have argued that the rally is the latest
sign of the disconnect between Wall Street and Main Street.
Friday's jobs report is expected to show unemployment in May rose
to 19.5%, from 14.7% in April, which would be the highest level on
record tracing back to 1948.
With the U.S. economy already reeling from the pandemic,
investors are operating with the assumption that "the damage has
already been done," said Brad McMillan, chief investment officer at
Commonwealth Financial Network.
Still, that doesn't mean financial markets and the economy will
be immune if the protests escalate, analysts and traders say.
Significant property destruction could hamper the operations and
sentiment of small businesses that were already struggling to
reopen. And it remains unclear if the mass gatherings will lead to
a second wave of coronavirus infections. If a spike in cases
occurs, that could slow the country's economic recovery, while
limited new infections could signal the worst of the virus is over,
Seema Shah, chief strategist at Principal Global Investors, said
the impact of the protests on markets will likely be greater if
they stretch for an extended period and become a focus of the 2020
"It's when there's an election approaching that investors start
to take real notice," Ms. Shah said. "The impact of these protests
will come closer into view."
Write to Caitlin McCabe at firstname.lastname@example.org
(END) Dow Jones Newswires
June 05, 2020 05:44 ET (09:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.