After the stock markets performed exceptionally well in 2021, we are now seeing a sharp fall in their value. The factors at play causing this might be connected with inflation fears and the economic powerhouse that is China slowing down.
Social unrest may also be influencing the current downturn. But what do we mean by social unrest? And, how does it affect the stock market?
Well, in this short guide we’ll explore some of the fundamental ideas about how social unrest can affect stock prices. Read on to learn how to factor in social unrest when you’re looking to invest in stocks.
What Is Social Unrest?
Social unrest, social upheaval, or civil disorder all refer to the same category of actions. They refer to a mass act of disobedience from the civilian population against the state.
An example of this type of behavior is the Truckers protesting in Canada known as the “Freedom Convoy.” Whether you agree with the protestors or not, one thing’s for sure is that the economic impacts were negative for the Canadian economy.
The Impact of Social Unrest on the Economy
The scale of social unrest and the type of economy it occurs in are factors to consider when predicting any negative outcomes of this behavior. In some cases, social unrest can have a large impact on the global economy, while in other cases there may be no impact at all.
In general, social unrest on whatever scale it exists creates uncertainty in the markets. The crucial thing to consider is to try and understand how markets react to social unrest.
You might be pleased to know that the stock market has a tendency to ignore instances of social upheaval. For instance, when George Floyd was murdered on May 25, 2020, there was what many would consider as large social unrest. However, on June 1 the stock market rose slightly.
That being said, some commentators wonder why markets continue to ignore social upheavals. Many warn of a downturn because the markets may be artificially inflated due to their ignorance of such events.
Where To Invest?
Whether or not you believe social unrest will affect the state of the stock market in a negative way, it’s always good to have a cautious approach to investing.
That’s why we recommend that you diversify your investments where possible. One great way to do this is to look into investing overseas where the effects of social upheaval in your country might not have such a large impact.
Here you can discover more about investing in overseas markets, like in Israel, for example, where stocks are remaining strong! After all, global finance can be very resilient and dilute the impact of civil disorder in numerous countries at one time.
Don’t Neglect the Impact of Social Unrest
Even if markets tend to ignore social unrest, the long-term effects might be negative. Thus, some good investing advice is to diversify your portfolio and think about buying stocks overseas in stable markets.
Learn more about similar topics on our blog.
