Raging Protests Across America Historically Bodes Well for Stocks; What About Bitcoin?
Coronavirus cases in the US are slowing down, rising by the slowest pace of 1.1% in five days after over 1.8 million reported cases and more than 106,208 deaths so far.
“Market upside ultimately depends on the path of the virus and the success of reopening,” wrote Credit Suisse Chief U.S. Equity Strategist Jonathan Golub on Monday.
The stock market opened higher only for Dow Jones to then drop by 0.38% along with the S&P 500 (currently above 3,000) and Nasdaq by 0.38% and 0.29% respectively.
When it comes to reopening the opening, Chicago which is hit hard by violent protests over a police custody death may delay its reopening.
Grappling with protests and cold war with China
The death of an African American at the hands of the police in the United States has set off mass protests against police brutality.
A chorus of criticism has erupted in many parts of the world alongside the unrest in the US over the death of 46-year old George Floyd last week.
Chinese officials and state media seized this news to compare these protests to the pro-democracy movement in Hong Kong, accusing Washington of hypocrisy.
Beijing repeatedly blamed “foreign forces” for inciting and diving Hong Kong protests.
"I can't breathe." pic.twitter.com/UXHgXMT0lk
— Hua Chunying 华春莹 (@SpokespersonCHN) May 30, 2020
The US administration has been vocal in support of Hong Kong’s pro-democracy movement. In response, Lijian Zhao the foreign ministry spokesman on Monday urged the US to protect the lawful rights of the minority and eliminate racial discrimination.
“US House Speaker Nancy Pelosi once called the violent protests in Hong Kong ‘a beautiful sight to behold.’… US politicians now can enjoy this sight from their own windows,” wrote Hu Xijin, editor-in-chief of nationalist tabloid Global Times.
Zhao also threatened with “counter-attacks” on the US for reversing Hong Kong’s special custom status.
This house of cards will come toppling down very soon
The stock market enters June on a higher trend despite multiple challenges ahead. S&P 500 rallied over 36% off its March 23 low despite a global pandemic, political and civil unrest, and economic and earnings downturn. Art Hogan of National Securities noted,
“At the levels we’re at, I wouldn’t be surprised to see the market take a pause and pull back.”
“We can say we’re slowly reopening and there’s going to be economic activity but it’s hard to defend valuations with so much unrest that we’re seeing going on in this country this weekend.”
But others believe protest won’t materially impact markets which is historically correct. As a matter of fact, stocks have risen while riots flared up. For the riots to have a major impact, there needs to be an expectation of long-lasting riots “otherwise they are noise as far as asset prices go.” Analyst Mati Greenspan said,
“Already hearing analysts with bated breath getting excited about buying stocks now because the #GeorgeFloyd protests will unleash additional monetary stimulus from the FederalReserve.”
“This house of cards will come toppling down very soon.”
Historically, stocks have not been negatively impacted by riots in the US.
1968 MLK Assassination, DJI +5%
1977 NYC Blackout, DJI +0.3%
1992 Los angeles riots, DJI +1%.
1999 Seattle Battle, DJI +1%
Stocks going up while riots flare up should not surprise anyone. pic.twitter.com/lyBwEskHBQ
— Alex Krüger (@krugermacro) May 31, 2020
According to Goldman Sachs analysts as well, the “remarkable journey” of US stocks is likely to stop, with its year-end target at 3,000, because of “numerous medical, economic and political risks dot the investment landscape.”
BREAKING: STOCK MARKET FUTURES TRADE IN POSITIVE TERRITORY AS THE ENTIRE COUNTRY IS BEING BURNED AND LOOTED. FEDERAL RESERVE SPOKESPERSON CITING ANONYMITY SAYS THE DESTRUCTION ENSURES MORE PRINTING AND LARGER TRANSFERS OF WEALTH TO THE 1%
— Stalingrad & Poorski (@Stalingrad_Poor) June 1, 2020
What about Bitcoin?
The world’s leading digital currency is trading around $9,550, up 0.80%. May marked the “highest monthly close on BTC in over 7 months.” So far, in 2020 BTC/USD is up 30.58% and nearly 50% in Q2 of 2020.
However, the June 1 candle has opened into resistance and it needs to “confirm itself above this structure” otherwise be ready for rejection and risk distribution.
If the stock market takes a hard hit, bitcoin could also be in danger of some extent of sell-off.
Historically, however, April, May, and June have been good months for bitcoin price performance which combined with investors preferring to hold their coins, institutional investors flocking to the digital currency and Federal Reserve's balance sheet surpassing $7.09 trillion for the week ending in May 20 works in favor of bitcoin.
In the current global backdrop of social unrest, bitcoin — a decentralized, deflationary asset that is censorship-resistant and unseizable offers a great alternative.