3 ways civil unrest following George Floyd nationwide protests hurts the stock market

According to a report from RBC Capital Markets, the effects of the civil unrest is a “potentially negative development for stocks." Yahoo Finance's Sibile Marcellus joins The First Trade to discuss.

Video transcript

ALEXIS CHRISTOFOROUS: We've seen civil unrest take hold in our nation, throughout our country here. And the market seems to be by and large ignoring it. We see stocks have been rallying in the past couple of days.

But there is a note out from RBC that says it may actually have a direct impact on the stock market. Sibile Marcellus has been checking this one out. And Sibile, what are some of the big takeaways from that report?

SIBILE MARCELLUS: That's right. So according to RBC Capital Markets' research, they found that the effects of the civil unrest could be a potentially negative development for stocks for three reasons.

Number one, we have a headline-driven market. The S&P 500 is highly sensitive to news developments. We saw that in February and March when we got negative news about the coronavirus. Also we got the negative economic impact of the shutdown. And we saw the S&P 500 fall steeply.

But then in late March and April, we had some optimism, some good news about vaccine and treatment developments, reopening of the US economy in several different states, and also we had some good news overall. So because of that, we saw the S&P 500 rally.

Number two, this is the second reason why RBC Capital Markets thinks that the civil unrest could hurt the stock market, is because it could trigger a second wave of the coronavirus pandemic. And fear of a second wave could cause the US economy, plans to reopen it to be shut down completely. And that would have an even more negative, devastating financial toll.

The third reason is because consumer confidence could be hurt by the civil unrest. Consumer confidence fell steeply in March and April, but it rallied a little bit in May. But that may be jeopardized with further civil unrest. And not just consumer confidence, but also corporate sentiment and small business confidence.

BRIAN SOZZI: And Sibile, just to stay on the topic of consumer confidence, we're seeing Walmart and Target continue to be impacted by this.

SIBILE MARCELLUS: That's right. So we saw these major retailers-- Walmart, Target, Apple-- all start to reopen their stores, trying to get business back to normal. But because of the civil unrest, because we saw store fronts shattered, business property destroyed, they've limited store hours. And they've also closed hundreds of stores.

BRIAN SOZZI: All right, we'll leave it there. Sibile Marcellus, thanks so much.