THINK STRATEGICALLY: Confronting the Confederate Past
A conversation for all Americans
I have to admit that until a few weeks ago, I was under the impression that eliminating statues and other monuments was an attempt to erase history. In my view, history should not be deleted. However, after the turmoil that erupted following the homicide of George Floyd, I began to test my beliefs.
The United States is not alone in confronting this dilemma of eliminating signs of the past that are hurtful and may remind everyone of a terrible chapter in a nation’s history. Most countries around the world routinely handle reminders of unpleasant chapters in their history. Recent reminders include Irak, Spain, Ukraine and Taiwan.
But Germany has been grappling with this issue for the past 75 years. If you go to Germany today, you will not see a single marker that reminds any German of the Nazi rule. The only exception is the concentration camps, which serve as a reminder that what happened to the Jewish in Germany should never occur again. The Germans have adopted a simple reality: Not seeing the markers means that they have forgotten the past. Thus, removing the remnants of a hateful society does not constitute in itself cause for any celebration, what is of critical importance is how we approach the aftermath.
The German example is unique as the nation did not seek closure because it believed it unobtainable; instead, Germans view their history as a scar that has taken its time to heal.
Here in the United States, some states continue to defend these reminders of America’s Confederate past. The very formation of the Confederate states and their secession was to keep African Americans as slaves, and it took a war, from 1861 to 1865, and 620,000 deaths, which represented 2 percent of the U.S. population.
Not only are the states promoting a long-lasting clash with the past, but they are also pouring taxpayer money to conserve and maintain statues and monuments of leaders who died as enemies of the United States.
As a nation, the United States must embrace changing its tune to allow for Americans of all colors, religions, ethnic origins and beliefs to co-exist. However, preserving painful periods of our past calls for mature negotiation by our civic society.
The lessons learned from Germany can provide deep insight as U.S. society thinks about destroying Confederate monuments as I believe all Americans must have problematic debates about ultimately deciding how to deal with the objects of the Confederacy. One thing is dealing with the objects; the other is dealing with the documentation of history. Judging from all the movies and documentaries that explain the realities of the Holocaust, the same reminder is happening with slavery and the treatment of African Americans in the United States.
In 1861, South Carolina, Mississippi, Florida, Alabama, Georgia, Louisiana and Texas chose to secede the Union to maintain the labor of African American slaves. This horrible past should have never happened.
Just like George Floyd should not have died for allegedly using a fake $20 bill, the United States should not have allowed slavery to exist. We must confront the reminders of slavery and all the consequences.
Week in markets: The Second Wave, Fed Actions and Investor Sentiment Wipe Out Gains
The U.S. and global markets could not wipe out the losses caused by massive sell-off during the week, while recording its worst losses since March. There are several reasons for the market turning negative. There are strong indications that a second wave of coronavirus infections may be hitting Sun Belt states, which are reporting their highest case numbers to date. These include Arizona, Texas and Florida, but in total, 22 states were reporting increasing case numbers as the U.S. economy reopens.
Additionally, investors have taken a dovish stance in response to the Federal Reserve’s assessment that the U.S. economy will take longer to recover. One of the main issues in the United States and Puerto Rico is how many of the thousands of small and midsize businesses will be able to survive the extended lockdowns and subsequent investments needed to operate in the newly heightened healthcare protocol environment. If a widespread failure of small business materializes, it would be disastrous for the economic landscape of many communities.
The Fed forecasts a 6.5% contraction in the U.S. economy this year, with the unemployment rate ending at 9.3%.
Another impact was the announcement by the International Air Transport Association (IATA), which released its financial outlook for the industry and advised that airlines are on route to lose $84.3 billion in 2020 for a net profit margin of minus-20.1%. Revenues will fall 50% to $419 billion from $838 billion in 2019. It also advises that losses are forecast to be reduced to $15.8 billion as revenues rise to $598 billion. The so-called BEACH (booking, entertainment, airlines, cruises and hotels) sector stocks suffered greatly as the Federal Reserve informed that the U.S. economy was far from recovering from the pandemic, saying the “ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
On to the markets: the Dow Jones Industrial Average closed the week on June 12 at 25,605.54, a loss of 1,505.44 points, or 5.55%, and a year-to-date (YTD) return of minu -10.3%. The S&P 500 closed at 3,041.31 for a loss of 152.62 points, or 4.78%, and a YTD return of minus-5.9%. The Nasdaq closed at 9,588.81 for a loss of 225.27 points, or 2.3%, and YTD return of 6.9%. The Birling Puerto Rico Stock Index closed at 1,464.56, losing 174.37 points, or 0.64%, for a YTD return of
minus-28.13%. Meanwhile, the U.S. Treasury’s 10-year note closed at 0.71%, a change of minus-2.98%, and YTD return of minus-1.2%. The U.S. Treasury’s 2-year note closed flat at 0.19%, a change of minus-13.64%, and a YTD return of minus-1.3 percent.
How Should Investors React?
Investors should be ready for continued periods of increased volatility; by no means is the economy out of the woods, and the recent Federal Reserve comments have validated this fact. Most of the economic benchmarks continue to show weakness, and the U.S. and Puerto Rico economies are in line to contract this year by 5.9% and 6%, respectively.
Let’s revise what not to do. One of the most impacted sectors in the Beach sector. Let’s review the price movement on some of these stocks in a period on five trading days:
There was intense buying of these stocks when the market began to rise, some rising close to 50%, only to fall back. As stocks dropped sharply last Thursday, the market followed by substantial gains, showing an asymmetrical balance of both confidence and wariness.
The current market is one of the best examples of how important it is to stay invested, focusing on one’s financial goals and always maintaining a well-diversified portfolio. The market’s recent strength also provides another reminder of the importance of staying invested. While the economy readjusts to our new normal, we should expect the occasional market pullback with increased volatility.
The Final Word: Our Views of the U.S. Economic Recovery
We continue to predict that the economy will recover in a “U” shape or stages and with long-lasting effects; however, not all sectors and businesses will operate as before.
From the economic benchmarks we have reviewed, we note that the gross domestic product will rise significantly in the next few months as the lockdown measures are gradually eliminated, businesses are allowed to operate, and employees return to their jobs. However, the healing process from the suddenness of the lockdown will take some time.
Before we can return to what will be a new normal, with strong healthcare protocols in place, these are the issues that investors must be concerned about due to their potential to impact the economy.
- The level of uncertainty that is impacting the U.S. and the world with the probability of a new wave of coronavirus infections that is deadlier than the first.
- How the economic impact on businesses both large and small plays out and how many of them file for bankruptcy.
- The heated November election and its uncertain outcome.
- Other geopolitical considerations that include China, Russia, Mexico and other trading partners.
Investors must be vigilant of the present and plan for the future, as the long-term outlook is positive for the U.S. and world economies.