THINK STRATEGICALLY: One Race, One Nation,1,000 Colors
As my high school education was to begin, my parents decided to send me stateside. Thankfully there was a group of us from my hometown of Ponce going as well, so during the adjustment period, while trying, I had familiar faces to talk things over. During my freshman year, I began to notice the designations some of my classmates gave each other: Italian American, Irish American, African American, Greek American, Arab American or Hispanic American, among others.
For me, it was not easy then to comprehend the significance of these origin titles because in Puerto Rico, you are either Puerto Rican or you’re not. There is no other description that we use to define ourselves. I have always found these designations to be divisive, racist and culturally wrong; in my view, these separations of race by origin have created and continue to generate a bias in the minds of most U.S. citizens. We must all recognize that the use of terms like African American, among others, are part of a movement of self-determination, and is used to distance themselves from other manners of referring to them.
After all, we are “One Race, One Nation & 1,000 Colors”; you see, we are either Americans or not. Before using the word American, there is no need to segregate anyone using African, Italian, Irish, Arab, Hispanic or Puerto Rican. When we use our U.S. passports, they are all blue, with white pages and feature the Great Seal of the United States proudly on the cover. Nowhere in the document does it say anything other than U.S. Citizen.
As we relive the discrimination that has resurfaced in the United States due to the current tone of the Trump administration, it has become clear that the proverbial melting pot society is supposed to be the United States of America only exists in theory, not in action.
While we need to understand the role of culture in the development of any nation and the descent of its citizens, I do not believe that using race titles makes much sense other than parcel out differences. My first year of high school allowed me to meet people who saw the world in a different light. The more I learned about why they held their beliefs, the more I understood. Today, we must acknowledge the broader diversity in and of the American experience and attempt to eliminate the many unnecessary obstacles that we all face due to constructions and perceptions of race, class, gender or sexual orientation in the United States of America.
More than 50 years after the Civil Rights Act, 60 years after Brown v. Board of Education, and many diversity initiatives, I can say without hesitation, the United States’ track record of creating opportunities for people of color and ending racial discrimination has been decidedly deficient.
The United States of America has allowed discrimination to flourish during the Trump presidency. The president does not understand that there are not two sides to hatred, or two sides in bigotry, or two sides of racism. The only correct course of action is to denounce all discrimination, hatred and intolerance in the United States.
Since 2017, we have had a combative, insensitive and immature leader who thinks only of himself when attempting to lead a nation. He has only succeeded in dividing the United States to levels of those that compare to the Civil Rights era. I know that what most of our fellow citizens want is for the Nation to flourish and with it all its citizens—to live the American promise of peace, prosperity and respect. What matters most is that we are One Race, One Nation and 1,000 Colors and all beautiful.
Week in markets: Optimism and Surprising Job Growth Fuels Market
The U.S. stock market closed the week with a bang, marking the third week in a row.
All economic sectors showed substantial gains; this after the U.S. Department of Labor reported on June 5 that during May, the economy unexpectedly created 2.5 million jobs, reducing the unemployment rate to 13.3% versus 14.7% in April, a decrease of 10.5%. The expectation had been a loss of 7.5 million jobs, which would have put unemployment at close to 20%, not far off the Great Depression peak of 24.9%.
This week, there will be significant analysis due to the enormous forecasting error in the jobs report. There was an overwhelming consensus that the economy would lose jobs, and it seems to have taken the Federal Reserve by surprise as well; it’s worth noting that the Fed hosts its Federal Open Market Committee meeting. Assuming that the jobs report is correct, it sets the initial tone for the economy to recover from its COVID-19 slumber.
On to the markets. The Dow Jones Industrial Average closed the week on June 5 at 27,110.98, gaining 1,727.87 points, or 6.81%, and a year-to-date (YTD) return of minus-5%. The S&P 500 closed at 3,193.93, up 149.62 points, or 4.91%, for a YTD return of minus-1.1%. The Nasdaq closed at 9,814.08, rising 324.21 points, or 3.42%, for a YTD return of 9.4%. The Birling Puerto Rico Stock Index closed at 1,638.93, a 147.33 point gain, or 9.88%, and YTD return of minus-19.58%.
Meanwhile, the U.S. Treasury’s 10-year note closed at 0.91%, a 40% change, and YTD return of minus-1%. The U.S. Treasury’s 2-year note closed flat at 0.22%, a change of 37.5%, and a YTD return of minus-1.2 percent.
What will Drive Markets?
- Jobs growth: Not a single economist in the United States had predicted 2.5 million jobs gained for May; instead, all the forecasts were that the economy was about to reach depression-era levels. As we begin to study the results, we can conclude that the Payment Protection Program (PPP) loans, combined with the reopening of the economy and the significant stimulus packages from Congress and the Federal Reserve, worked better than anyone would have forecast. However, the story behind the story is that the labor report had a couple of caveats. For one, it stated that a classification error led it to understate the unemployment rate by 3 percentage points. Had workers been appropriately classified, this rate would have been 16.3% instead of the 13.3% reported. Also, the PPP funding is temporary, and once it runs out, the scenario may change.
- Public corporate earnings: The earnings of public corporations are one of the best barometers of the market. Investors should be mindful of the next quarters of 2020, which may better measure the status of the recovery. Usually, it is tough to sail appropriately during a storm, and we are still too in the midst of the storm to accurately measure how the stages of the economic recovery will play out.
- What are investors to do?: This is a good time to rebalance portfolios and seek a better mix of stocks and bonds with the right degree of risk tolerance and completely diversified across asset classes to allow moving forward with confidence despite the storm.
The Final Word: Washington Update— Stimulus 4
As we continue to follow the nation capital’s developments, we expect the Senate will deal with the next stimulus bill in July.
From what we have been advised, we can share the following:
- The bill will include some form of additional unemployment insurance assistance, with more funds and improved flexibility of usage for state and local governments.
- Some degree of liability protection for small businesses, schools and hospitals, among others, during the reopening process.
- Payment Protection Program: The Senate approved a bill that provides borrowers additional flexibility on using funds under the $650 billion PPP. In particular, extending the timeframe that borrowers have to spend the funds to 24 weeks instead of eight weeks and to give borrowers more flexibility in seeking loan forgiveness of funds to be used for payroll, for which only 60% would be required.
With more than 42.6 million Americans having to file new unemployment claims, it is clear that economies across the country face significant distress.
While hardship spread to every corner of the United States, if the government is not able to bring the economy back to normal levels, these 42.6 million Americans may very well determine who wins the presidential election in November. After all, we are One Race, One Nation & 1,000 Colors.
Francisco Rodríguez-Castro, president & CEO of Birling Capital, has more than 25 years of experience working with government, and multinational and public companies.