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 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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