Impact of protests on US financial markets and economy

Protests and lootings taking place across the US in response to George Floyd's death in police custody could weigh on both markets and the economic recovery, according to financial experts and reported by

Since Floyd’s death on May 25 in Minneapolis, Minnesota, civil unrest has sprung up across the country. At least 4,400 people were arrested in protests over the weekend, The Associated Press reported.

Six states and 13 cities have declared states of emergency, and the National Guard has been called to help in 21 states and Washington, DC, The Wall Street Journal reported on Monday, citing the Federal Emergency Management Agency. In addition, at least 26 cities across 16 states have imposed curfews.

While global markets have focused more closely on the brewing tensions between the US and China that have been renewed in recent weeks, the civil unrest could be a negative catalyst for stocks, according to industry watchers.

Mass gatherings such as protests could lead to a second wave of COVID-19 cases, which could further damage the already fragile US economy. In addition, continued unrest could threaten consumer confidence, a cornerstone of the economy, and hurt local governments and cities already reeling from the coronavirus crisis, experts said.

Here’s how four financial experts think protests across the country could weigh on markets and threaten the US economic recovery.

  1. RBC Capital Markets: “The news flow appears to be deteriorating on two fronts.”

    “The stock market seems more focused on the trade war than the civil unrest. We share the market’s confusion about what the latter means for the path of US equities,” Lori Calvasina, head of US equity strategy at RBC Capital Markets, wrote in a Monday note.

She continued: “Nevertheless, there are three reasons why we view it as a potentially negative development for stocks.”

  1. The S&P 500 has been reactive to news flow.

Markets have whipsawed on positive and negative news about the coronavirus, the economy, vaccine efforts, and more since February, Calvasina said. “As June gets underway, the news flow appears to be deteriorating on two fronts,” she said.

  1. Mass gatherings spark concerns about a second wave of infections.

“We’ll let the medical experts handle this debate, but will weigh in on why this matters for stocks,” Calvasina said. “It bears on how quickly the US economy can get back to something resembling normal. Second wave fears could halt reopening or keep behavior cautious.”

  1. Consumer confidence could be pressured.

“While hit hard, it’s never fallen to past crisis lows in early 2020 as has been the case with a number of industrial economic indicators,” Calvasina said.

“A key question for investors is whether the sequential improvement in business activity and consumer behavior highlighted in May’s earnings calls and investor conferences will continue to build. It’s far too early to know the answer.”

  1. Oppenheimer: “Failure to practice social distancing while protesting could undermine recent efforts and progress made in slowing the spread of Covid-19.”

    “A tragic event in Minneapolis that occurred last week has seen not only demonstrations expressing grief and indignation in the community in which it occurred but in a number of other cities stateside over the past few days,” John Stoltzfus, the chief investment strategist of Oppenheimer, wrote in a Monday note.

He continued: “Unfortunately acts of violent protest and vandalism have resulted in injuries and destruction of property in a number of communities and cities across the country.

“The crowds generated by the protests have resulted in concerns by health officials that the proximity and massing of people in demonstrations without masks and the failure to practice social distancing while protesting could undermine recent efforts and progress made in slowing the spread of Covid-19,” Stoltzfus said.

“In this first week of June investors will be weighing all of the above along with a brace of economic data, the remaining Q1 results of companies yet to report as they ponder which direction the equity market will take next and the election primaries that lie ahead.”

  1. Oanda: “The impact will be felt by state budgets of many of the big cities.”

    “Protests following George Floyd’s death are spreading like wildfire across the US. After the sixth night of protests, financial markets have been unperturbed, but the impact will be felt by state budgets of many of the big cities,” Edward Moya, a senior market analyst at Oanda, said in a Monday note.

He continued: “The fiscal hit from dealing with COVID-19 and the recent protests could lead to several government job losses as many states were already strapped for cash and have had difficulty secure federal aid.

“The economic recovery is fragile and violent protest across major US cities will make this rebound longer and flatter,” Moya said. “For now, risky assets remain supported by the Fed put.”

  1. AvaTrade: “The on-going protests and riots do present a threat for the US financial markets.”

    “We believe that the on-going protests and riots do present a threat for the US financial markets as it erodes investor confidence which is already scarce,” Naeem Aslam, the chief markets analyst at AvaTrade, said in a Monday note.

He continued: “In addition to this, we are also wary that these riots may push the coronavirus numbers higher.

“The US officials have worked hard to put a leash on these numbers, and if the problem isn’t addressed soon, we may be facing another wave of coronavirus a lot more earlier than currently anticipated.”

When The Protests Start

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