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Why Doesn't The Market Have a Conscience?

The market has continued to rebound despite the emotional state of our nation.  It's been nearly three weeks since the killing of George Floyd in Minneapolis, MN.  Since his death, we’ve experienced 13 trading days (not including today).  Of the past 13 trading days, only five have been negative*.  This surprised me.  It feels as though we are experiencing socially tumultuous times, and yet the market just carries on as if nothing ever happened.  

“At the end of the day, the market has no conscience. Investors are simply trying to make money…” says Jim Cramer, host and regular commentator for CNBC.  As heartless as that sounds, it’s true.  My investments are there to grow over time and provide for my livelihood when necessary, which is essentially what Cramer was getting at.  

It’s not as if the market completely ignores what people have to say, especially those in power.  In fact, Barron’s conducted a study looking at the tweets put out by President Trump.  Their findings (conducted from 01/01/2016-08/31/2019) show that on days Trump tweets 20+ times, the S&P 500 drops on average 0.03%.  If we look at a specific example, on August 1, 2019 Trump tweeted that he will impose 10% tariffs on an additional $300 billion worth of imports from China.  All three major US indices closed down after Trump’s tweet that day.  Was it because the market doesn’t like Trump?  Nope, it was because the market prices in widely known information (or tweets) at any given time.  If the market suddenly believes political officials (regardless of party affiliation) will impose tariffs, it contumaciously retreats.  Tariffs equal less free trade which limits individual and business choice.  That’s a no-no to Mr. Market.

The market has been much more volatile around tariff talk than it has to recent social movements, and that’s because of the timeline each occurrence is working with.  For example, imposing a 10% tariff on imports from China is a tangible activity that creates nearly an immediate outcome.  Whereas demonstrations demanding social justice and systematic change do not create such quick turnarounds.  

Let’s use the history of social movements to help guide us through the events we are experiencing today. The women's rights movements can be traced back all the way to 1848 when the first ever women’s rights event was held at the The Seneca Falls Convention.**  

This convention created the Declaration of Sentiments which addressed 19 “abuses and usurpations” for women (education, property, and the right to vote to name a few!).  Yet, it wasn’t until August 18, 1920 that the 19th Amendment was enacted allowing all American women the same rights and responsibilities of citizenship that the men of their time were enjoying .  That was 72 years later…

That’s not the only movement that has taken time to see major change occur.  Back in 1924, Henry Gerber founded the Society for Human Rights, the first documented gay rights organization in the United States.  Throughout the decades we saw the state of Illinois decriminalizing homosexuality in 1961, the Stonewall Riots in 1969, and the District of Columbia passing a law that allowed gay and lesbian couples to register as domestic partners in 1992.  It wasn’t until June 2015 gay marriage became legal across the entire nation.  That’s 91 years after the Society for Human Rights was founded.

Why tell you this?  Well, I don’t know about you, but for me… the last few weeks I found myself wondering why a tweet can make the market upset, but an outraged society doesn’t.  Is Wall Street really that complacent?  A part of me wanted to see the market retract, almost as a symbolic and emphatic reaction.  But, I had to remind myself, the market doesn’t have a conscience.  Instead, it moves based on widely known information.  Therefore, “it” (the market) knows that these social movements take time, because “it” has been around to experience them throughout the decades.  After all, the New York Stock & Exchange Board (NYSE) was established in 1792.  

This August marks the 57th year since Martin Luther King’s “I Have A Dream” speech.  Clearly, the demands of our communities will not (and have not) seen immediate societal reform.  History tells us that we are slow to implement progressive change.  The market knows this, making it impossible to calculate the long term impact these movements will have on our dollars.  For some reason, that makes me feel better about the market reaction we’ve seen so far since May 25th.  History tells me that both the market and our society are better today than they were in previous decades, and they will both be better in the future than where they are at today.

- Natalie

*By negative, I mean days in which the S&P 500 closed lower than the previous trading day.

**Yes, women’s rights were being contested prior to this convention, but this convention laid the groundwork for demanding equality for all U.S. Citizens, including women.

Disclaimer:  This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.

Natalie Slagle
Founder, Fyooz Financial
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