Will race relations rock markets? election campaign, coronavirus, crippled economy all in the mix
|America is divided by demonstrations against racial discrimination that come on the backdrop of the coronavirus epidemic and attempts for a recovery. Will this or something else eventually affect markets? Valeria Bednarik, Joseph Trevisani, and Yohay Elam have a lively discussion about all these topics.
Yohay Elam: Cities in the US have witnessed large demonstrations against systemic racial discrimination. The indignation may eventually influence the elections and may turn into a seminal moment in US history. However, markets have shrugged off the events, as they did with China's tightening grip on Hong-Kong and several other global reasons to be worried
Yohay Elam: Is there a chance they will move markets?
Valeria Bednarik: The exacerbated income inequity and the huge levels of unemployment in the US are no doubts part of these recent violent riots. I'm not quite sure that the market will move past this, although maybe a clearer picture may surge tomorrow, after the release of the NFP report.
Yohay Elam: Non-Farm Payrolls may show an unemployment rate of above 20%
Yohay Elam: Coronavirus has hit blacks disproportionately, also a factor behind the indignation
Joseph Trevisani: The demonstrations will have little impact on markets. As for the election, the riots that have accompanied the demonstrations in many cities have resulted in vast damage and will likely have as great an impact on the election as the protests. In Manhattan, almost every major shopping street has been looted. Long stretches of 5th and 6th Avenues, Times Square, Herald Square Soho, and the Village are boarded and deserted. It is profoundly disturbing that the city and state governments choose not to suppress the riots
Yohay Elam: Markets seem to think the damage caused by looting is minimal
Joseph Trevisani: Markets know that the rebuilding will generate economic activity
Valeria Bednarik: Yups, agree with that. Rather, the question is if this will trigger a second wave of coronavirus, and/or if things will escalate
Yohay Elam: There are already signs that coronavirus is on the rise, or at least not falling
Yohay Elam: That began before the protests
Yohay Elam: Given the virus' incubation time
Joseph Trevisani: The protests and the looting are two separate events. The first is supported by almost all Americans even if they disagree, the second is not
Yohay Elam: Most Americans are against looting
Yohay Elam: And hopefully against systemic police violence
Yohay Elam: George Floyd's murder was only the straw that broke the camel's back
Joseph Trevisani: I think the protests have destroyed the rationale and acceptance of the lockdowns and social distancing rules. They now appear to be arbitrary, unfair and will be increasingly ignored
Yohay Elam: Trump failed to lead by example, flouting rules and refusing to wear a mask
Yohay Elam: He made the rules look ridiculous
Joseph Trevisani: As for the canard of systemic police violence against, it is not supported by any statistics
Yohay Elam: The urge to reopen is based on Trump's self-centered desire to get re-elected
Yohay Elam: not on any health considerations
Valeria Bednarik: Indeed
Yohay Elam: and now that COVID stats are rising, it seems that reopening is a boomerang
Valeria Bednarik: not sure how his threat to send the military is affecting polls
Joseph Trevisani: No the urge to reopen is supported by the majority of people who want to live and earn and protect their families
Yohay Elam: better to keep paying people to stay out of work and reopen when it is safe, like Denmark is doing
Joseph Trevisani: The military will not be sent. It was a threat to get Democratic politicians who have let their cities be looted, to act
Yohay Elam: Just suggesting using the military added fuel to the fire
Joseph Trevisani: It was supposed to
Valeria Bednarik: Yeah, for sure, but his menace isn't helping to calm down the mood
Yohay Elam: Defense secretaries criticized him
Yohay Elam: Trump's short-term political stunts to rally his base come and go. They may or may not achieve their goals. But the hatred stays
Yohay Elam: Mattis said it is the first time a president does not unite the nation
Yohay Elam: I guess that Republicans and Democrats are growingly living segregated lives, in their own bubbles, including economic ones
Joseph Trevisani: I think the menace was created and exacerbated by the crime. People live and work and shop in all of the looted areas. I know people who were terrified to get we were terrified that the looters would break into their building and start ransacking apartments
Joseph Trevisani: Mattis is right in one sense. Trump is not an uniter he is an instigator, but he is president because he rejects the political consensus of the last 30 years
Yohay Elam: Crime levels have been falling before Trump
Yohay Elam: A long-term trend for nearly 30 years since the 90s
Yohay Elam: It is still too early to tell if it rises
Joseph Trevisani: True. They have now been rising for several years, particularly in urban areas
Yohay Elam: Police officers who are caught killing blacks on camera are often acquitted, not inspiring confidence
Joseph Trevisani: For example, New York State passed a new bail law last year, under its rules almost every arrested looted was released without bail the next day
Yohay Elam: But in New York
Yohay Elam: Amy Cooper
Yohay Elam: She knew that calling the police and saying a black man is threatening her would risk that man's life
Yohay Elam: She knew where the police stand
Yohay Elam: and he only asked her to put the dog on a leash
Valeria Bednarik: That only shows how deep are the roots of racism in the US
Yohay Elam: indeed
Valeria Bednarik: but then again, it's no news to the market
Yohay Elam: It is unlikely to impact the elections though. Trump is not building on black votes, some Democrats take them for granted, and many cannot vote anyway
Joseph Trevisani: Amy Cooper? The woman with the dog in Central Park. No, he said if you don't leash your dog you might not like what I am going to do. Was that a threat? I know that area of the part, it is deserted and isolated. Did she overreact perhaps? Was he deliberately provocative, probably
Joseph Trevisani: On the topic of race relations in the US the media is almost entirely untrustworthy
Yohay Elam: When a white reporter is politely asked to move out of a zone and black one is arrested
Joseph Trevisani: But back to the election. My guess is that Trump has lost little in this entire mess
Yohay Elam: In Minnesota, after Floyd's murder, when the world is watching
Yohay Elam: It shows that the police has serious issues
Yohay Elam: And that there is no shame in showing it publically
Valeria Bednarik: Agree... and you can blame it all on the media. Is not the media reporting, is people. Everyone is a live reporter these days
Yohay Elam: Blacks suffer harassment
Yohay Elam: Ahmaud Arbery, a runner like me, just black
Yohay Elam: security guards follow blacks who enter shops
Joseph Trevisani: As I said earlier, statistics, not emotions, show no systemic racism or differential treatment of blacks and whites by law enforcement in the US
Yohay Elam: Indeed, it will not affect the elections
Joseph Trevisani: I know it does not fit the narrative, but it is true nonetheless
Yohay Elam: when a black man carrying a licensed gun tells it to the police, he is still killed
Joseph Trevisani: As for the markets, equities seem convinced that there will be a rapid recovery
Yohay Elam: And the NRA remains silent
Yohay Elam: Equities are fueled by the Fed
Joseph Trevisani: Anecdotes are not statistics, the same types of polices encounters happen even more frequently on a percentage basis to whites but it never reported or considered racist
Joseph Trevisani: To some degree yes. I read Barbara Rockefeller's piece yesterday and was surprised that she now thinks a V-shaped recovery is coming
Yohay Elam: I was also surprised by that
Yohay Elam: I'm in the L-shaped camp
Yohay Elam: Or more of a Nike swoosh
Valeria Bednarik: I go with the Nike swoosh also
Yohay Elam: crash, bounce, and reaching pre-pandemic levels only in a year or two
Valeria Bednarik: strepitous slide and slow but steady recovery
Yohay Elam: coronavirus is not over
Yohay Elam: even without the protests
Joseph Trevisani: I think you are right the return to pre-pandemic levels will take time, too much damage has been done but after the cessation of activity a rebound is guaranteed
Yohay Elam: a rebound is probably happening right now
Yohay Elam: The Economist talked about a 90% economy
Yohay Elam: Peter Altmaier, Germany's economy minister, said there a return to pre-crisis levels will happen only in H2 2022
Yohay Elam: Powell mentioned late 2021
Yohay Elam: Any estimate?
Joseph Trevisani: 2021
Yohay Elam: A Nike swoosh
Joseph Trevisani: But then the future arrives very fast, my girls are almost teenagers
Valeria Bednarik: and the ECB expanded its stimulus and mentioned June 2021.. so late 2021, seems the most accurate estimate right now
Joseph Trevisani: China's statistics are encouraging
Yohay Elam: A lot depends on the virus, which is easy to forget around the US demonstrations, Hong Kong, and whatnot
Yohay Elam: It's always hard to believe Chinese data, but the trend seems positive
Valeria Bednarik: China's statistics are not the most reliable ones, and the market tends to ignore them
Joseph Trevisani: Yes, but I think the virus will not matter but we shall see
Yohay Elam: They seem to have suppressed the disease and suppressed talk about potential new outbreaks
Joseph Trevisani: True, but the Caixin stats showed the same improvement
Yohay Elam:
Joseph Trevisani: The latest CDC data on the virus shows an implied fatality rate of 0.26%
Yohay Elam: Global cases are below their peak, especially in Western countries
Yohay Elam: COVID-19 is still far worse than the flu, more contagious and the population is not immune
Joseph Trevisani: Counting against my general optimism were the claims numbers today, continuing claims rose about 600,000
Joseph Trevisani: That is agreed on the virus
Yohay Elam: ADP's figure was super strong
Yohay Elam: Well, horrible, but far better than expected
Yohay Elam: Sounded too good to be true
Joseph Trevisani: Yes, it makes it difficult to write about, you have to reverse your adjectives, somehow better than expected for a -2.76 million number doesn't seem right
Valeria Bednarik: 2.8 million jobs shed in one month for sure does not sound good to me
Joseph Trevisani: Exactly, but if it comes in a 3 or 4 rather than 8...is it better than expected or not as bad... I go with the latter
Yohay Elam: ADP had a good gauge of April´s NFP
Yohay Elam: so hopefully they are right also now
Joseph Trevisani: Yes, and continuing claims are rising far less than initial claims
Yohay Elam: They process one-sixth of all payrolls, which is a lot, but not everything and things are moving fast
Yohay Elam: Still, the double-digit unemployment rate is likely by year-end
Valeria Bednarik: Yups, that's also quite clear, and priced in
Joseph Trevisani: Yes, I don't see how unemployment cant be reduced quickly. June will be the telltale, if there is improvement then it should accelerate. If not then the scenario has to be rethought
Yohay Elam: June is also a test case for coronavirus
Yohay Elam: to see the effect of reopening
Yohay Elam: the month has only begun
Joseph Trevisani: Well, if the protest and riots don't spread the virus in the US, what will?
Valeria Bednarik: nothing, that's quite a point
Yohay Elam: in Spain, a birthday party triggered dozens of infections
Joseph Trevisani: Yes, rather a difficult way to test a hypothesis
Yohay Elam: You can never know when and where you encounter the disease
Yohay Elam: luckily, medical staff have much more experience and knowledge, and the chances of severe damage or death are lower
Joseph Trevisani: We must remember, from three months and a lifetime ago, the purpose of the lockdowns and the business closures was to prevent the medical system from being overwhelmed. It was not to completely stop the spread of the virus or eliminate it. At some point, the damage to life and health from the economic devastation far outweighs anything else. I would say that in the US the riots prove that point
Yohay Elam: The purpose was also to save lives
Yohay Elam: Some lives
Valeria Bednarik: I'm more with Joseph on this matter. Economic devastation will largely outweigh everything else because people can't live forever from state support
Yohay Elam: A better economy improves the quality of life. Not dying improves the quality of life
Valeria Bednarik: not eating is more deadly than COVID-19
Joseph Trevisani: Yes, but unemployment, depression causes death in a not short amount
Yohay Elam: In recessions, fewer people die. More die from accidents than from depression
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