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Markets grapple with civil unrest after George Floyd killing

On Monday morning, the markets are grappling with ongoing protests over the death of George Floyd in police custody. Chris Versace, Tematica Research CIO says, "we're just starting to put the pandemic in the rear view mirror, this could be another setback for recovery."

Video Transcript

ALEXIS CHRISTOFOROUS: Now Wall Street appears to be discounting the clashes between police and civilians in the US. Taking a look again at stock futures, they've sort of been all over the map this morning. They're slightly lower right now. Dow futures off about 30, S&P futures down five, and NASDAQ futures giving back about 36 points.

I want to bring in Chris Versace now. He is CIO at Tematica Research. And Chris, thanks for being with us. Why aren't we seeing a more aggressive response from Wall Street regarding all of this racial unrest we've been seeing in our country the past few days?

CHRIS VERSACE: Well, Alexis, I think there's a couple of reasons for that. One, I think people are still trying to wrap their heads around what's happening and what the economic impact is going to be. Again, we are seeing a number of retailers and other companies shut their doors, reduce services. So the question, at least in the short term, is what's the vector of the velocity?

My concern, however, is that these protests, one, could jump start cases in the coronavirus, thereby reigniting some of the recent fears. But two, we're just starting to put the pandemic in the rear-view mirror. We're starting to see parts of the country reopen. This, again, could be another setback for near-term economic expectations.

However, and I think this is the big issue here, is most people are probably thinking is this a big issue? Yes. But what's the-- what's the duration of the impact likely to be? Is it going to be weeks and months? No, probably more like days, maybe a week at that.

And so I think what we are seeing is all of that mental math, if you will, coming into play, as people try to estimate the degree of this uncertainty.

ALEXIS CHRISTOFOROUS: Chris, front of mind for investors right now, would that be, even more so than the pandemic and these violent protests, would it be the China-US relations and the breakdown we're seeing there? I mean today, we're hearing Bloomberg News reporting that China has ordered some companies to halt imports of some US farm goods, including soybeans. Does that have a more tangible impact for investors right now?

CHRIS VERSACE: So I think there are really two or three things that we'll be watching. Obviously the protests, I think you're right. Again, another round of fresh uncertainty.

It looks like we will get the trade deal. But what are we going to get alongside the trade deal as it kind of moves forward? A lot of puts and takes, will there be more saber rattling? And if so, where does that line stop? That's the freshest unknown.

But I also think people are going to really dig into some of the key economic data we're going to get this week to determine the velocity at which the global economy is starting to reopen. May, better than April. Is order data coming in stronger than expected, pointing towards a better June? I think it's those three pieces that will be swirling around this week.

BRIAN SOZZI: Chris, the protests, do you think it just pushes off a recovery firmly into 2021? Lots of speculation that we'll see a V-shaped recovery, some form of square root. That's all fine and good. But what you're seeing right now, does that take that off the table and make it a 2021 event?

CHRIS VERSACE: Brian, we always think thematically at Tematica, right? So we do think that there are going to be certain areas of the economy that continue to just go like gangbusters-- those connective technologies, for example. But when we think about the overall economy, remember, the US is tied directly, indirectly 2/3 to the consumer and consumer spending. So when we have 40 million people filing fresh unemployment claims over the last several weeks, we see personal income and spending-- the report we got last week, where spending dropped and saving is up.

The real issue is going to be how willing are people to go out, open up their wallets, and spend? Where are they going to spend and what will they spend on? We think that there will be certain sectors that are just harder hit than most-- obviously travel, for example, entertainments, restaurants, game-- not gaming, but live entertainment, that sort of thing.

And we think in the near-term, some of the safer havens will be companies like Amazon, for example, a Costco, where people can continue to get what they need, preferably at better prices.

ALEXIS CHRISTOFOROUS: All right, Chris, I want to talk more about those opportunities for investors a little bit later on. I know you're coming back to join us around the opening bell.

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