By Seth Gellman
Source: Marketwatch Photo Illustration/Getty Images
As the Capitol was swarmed by insurrectionists, the stock market didn’t bat an eye. Many thought that they would panic, but that was not the case. While rioters stormed the capitol, the market was still hitting record highs.
The stock market has a history of being unfazed by civil unrest. During the protests over the killing of George Floyd, both the Dow Jones Industrial Average and S&P 500 increased.
Tina Fordham, head of global strategy at Avonhurst, an advisory business focused on helping funds and securing lenders, has previously stated that political unrest in developed markets has little effect on equity markets.
She said that investors generally believe that the United States will get through it and the country will not get out of control. The stock market “crashes” when it predicts important change to follow. For example, the market plunged when Nixon was impeached, while it soared during Clinton’s impeachment. In both of these reactions, the market reaction was in reaction to the broader economic context. Under Nixon, high inflation and rising oil prices shattered the economy. Under Clinton, the market soared under strong fundamentals.
Fordham cites the market’s reaction to 1968, where deadly protests erupted across the nation after the assassination of Martin Luther King Jr. While these events are consequential and important, they don’t affect corporate numbers much.
At the end of 2019, while Trump was getting impeached, the stock market largely trended flat or slightly increased. Investors believed nothing would come of it, since it was widely believed that the Senate would acquit him.
Wall Street was banking on a swift passage of another stimulus package under Biden, which has been pushed aside due to the impeachment. The reaction to the impeachment has been to wait and see what happens, as uncertainty plagues the country.
The stock market has been, for the most part, unaffected by the recent developments after riots erupted in the capitol. Its history of focusing on economic gains rather than social unrest has made it unfazed by much of the civil unrest that the country has gone through.
