June 1 – One of the mantras people talk about with the stock market is that it hates uncertainty. With the coronavirus the market didn’t know what was going to happen and as a result the market dropped from over 29,500 down to below 18,600.
Today, with disturbances taking place in nearly every major city one has to wonder if there will be another impact on the market and resulting in another drastic drop. So far that doesn’t seem to be the case but analysts are warning the recent rise in the stock market isn’t reflecting reality so it’s not surprising that the market hasn’t factored this in.
One could say the market is only seeing what it wants to see. The market, eager to see the country reopen, are pushing to replicate the market highs it saw earlier this year.
However in reality, the market, and potentially protesters, is likely to be disappointed when reality sets in and understands the damage to the economy and country that has taken place. Rebuilding an economy, or a police force mentality, isn’t likely to happen overnight as much as one might wish it could happen.
That’s not to say it shouldn’t be the goal but from an investing standpoint if it’s taken years to move society to change than one should expect the same pace of change in the future. Events can speed up that change but it is dependent on the message.
The image of a knee on a throat could make for quicker societal change, but if that image is overtaken by images of fires in the street the moment for change can be delayed or lost. But it could frighten the market, resulting in another drop.
A short-term drop may be the needed price to pay for long-term change, the question is whether this is an event that qualifies as one to try to time the market.