- Investors largely ignored a weekend filled with police-brutality protests, looting, and civil unrest as markets climbed higher on Monday and Tuesday.
- Risk assets have been largely detached from surrounding trends in recent weeks, continuing their rally even as economic data comes in below expectations and as health experts caution against premature reopenings.
- "The stock market doesn't care about social justice," Jim Cramer, the host of CNBC's "Mad Money," said on Monday, adding that "investors are simply trying to make money."
- The trend isn't new to 2020. When a similar combination of a pandemic and protests slammed the US in 1968, the S&P 500 reached a 10% total return by the end of the year.
- Such market rallies "may seem counterintuitive, and perhaps not even 'fair,'" but they've emerged time and time again, said Nicholas Colas, a cofounder of DataTrek Research.
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After a weekend filled with police-brutality protests, looting, and civil unrest, the stock market barely batted an eye. All three major US indexes climbed unabated on Monday and into Tuesday.
Part of that is because the market is — and has always been — a forward indicator. It most directly reflects investor expectations for corporate profit growth. So while the death of George Floyd and the resulting protests caught traders off guard, their lack of anxiety suggests they don't see the societal unrest as a direct threat to long-term company earnings.
"The stock market doesn't care about social justice," Jim Cramer, the host of CNBC's "Mad Money," said on Monday. "Investors are simply trying to make money, and that's why they're crowding into the stay-at-home economy stocks."
It's not the first time in recent history that investors have looked past dire developments. As economic data released throughout the second quarter detailed the coronavirus pandemic's economic fallout, stock prices surged from multiyear lows; the S&P 500 has rallied more than 35% since March 23.
Rather than succumb to the negative economic signals, investors were encouraged by unprecedented stimulus measures enacted by the Federal Reserve and the US government. In recent weeks, equities have also been lifted by economic-reopening hopes and the prospect of a swift recovery.
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The market is following a trend seen during past instances of nationwide chaos. When investors in 1968 faced a pandemic, political strife, and protests seeking racial equality, the S&P 500 rallied through the year to a 10% total return, Fundstrat Global Advisors highlighted in a note on Sunday.
History is rife with examples of markets looking through such turbulence, said Nicholas Colas, a cofounder of DataTrek Research. Such behavior "may seem counterintuitive, and perhaps not even 'fair,' but it's absolutely true," he added.
Colas cited the Occupy Wall Street movement, which rocked lower Manhattan from September to November 2011: The S&P 500 shrugged off the anticapitalist demonstration and climbed 4.5% over the period. He also pointed out that during President Bill Clinton's impeachment in 1998 and 1999, the benchmark index soared 23% and 21%.
Still, some experts aren't especially optimistic that markets will be similarly detached this time. Julian Emanuel, the chief equity and derivatives strategist at BTIG, said on Monday that the protests added to a "menu of uncertainties" that investors have largely ignored.
John Stoltzfus, the chief investment strategist at Oppenheimer, said on Monday that the protests could indirectly affect markets by tanking optimism about falling coronavirus infection rates. The crowding at the demonstrations could "undermine recent efforts and progress made in slowing the spread of COVID-19," he said.
In his televised comments on Monday, Cramer said the weekend's events extended trends that markets were already displaying. He pointed out that instead of fleeing markets for havens, investors were looking for ways to profit from the protests. Monday's session saw guns stocks rally alongside the major tech names that soared during widespread quarantines.
"From this stock market's perspective, everything that happened this weekend means the stay-at-home economy will last longer than we thought," Cramer said. "Right or wrong, thoughtless or cerebral, it's worth exploiting."
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