Jul 20, 2020

Axios Markets

By Dion Rabouin
Dion Rabouin

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🎙"We rise in glory as we sink in pride." - See who said it and why it matters at the bottom.

1 big thing: The economic activism of the civil rights movement

Screenshot of a tweet from Martin Luther King's daughter Bernice King showing a photo of C.T. Vivian, Joseph E. Lowery, John Lewis and Andrew Young.

With the deaths of Presidential Medal of Freedom honorees John Lewis and Cordy Tindell "C.T." Vivian on Friday following the death of honoree Joseph E. Lowery in March, the world has lost three vanguard leaders who conceived and led a revolutionary movement that changed the United States forever.

Why it matters: As fewer of these men remain to tell the story of how they engineered the civil rights movement, it's important to remember the economic and strategic vision that fueled it.

What happened: The civil rights movement was a coordinated and multifaceted effort that took aim at the economic engine of businesses upholding the era's racist policies.

  • Bus boycotts, Freedom Rides, sit-ins, buyers' strikes and sidewalk demonstrations were all leveraged to pit businesses' interest in making money against their interest in upholding racial segregation.

What it means: The bus boycotts coordinated by Martin Luther King Jr. and others drained transportation systems of revenue by instructing their primary customers not to ride and providing alternative sources of transport.

  • The Freedom Rides, led in part by Lewis, pitted local officials who pulled Greyhound buses off the roads to confront mixed race riders against shareholders at Greyhound who needed bus lines to operate.
  • The sit-ins and other actions at public facilities, directed in large part by Vivian, urged Black citizens to occupy "Whites only" lunch counters, waiting rooms and entertainment venues where refusing them service meant no one was served and no money was made.
  • Strikes, like the famous "I am a man" protest led by sanitation workers in which more than 10,000 tons of garbage piled up in Memphis, showed the economic value of underpaid Black workers.

What they said: "It was the strategy," Vivian told me in an interview while I was a reporter at the Atlanta Daily World.

  • "That strategy of nonviolent direct action — that’s what won. That’s what made the difference."

The big picture: These economic actions worked in tandem with efforts to bring media attention to marches and demonstrations where peaceful protesters were beaten savagely by armed mobs, often with the support and/or active participation of local police.

  • The media exposure helped kindle support for the movement's crown jewel, the 1963 March on Washington for Jobs and Freedom, which brought together the heads of numerous civil rights groups along with 250,000 supporters to show lawmakers that the cause of civil rights had become mainstream.

"No revolution has ever been successful without winning the sympathy, if not the active support, of the majority," Bernard Lafayette, who has led numerous civil rights organizations, including the Southern Christian Leadership Conference (SCLC) with King, told me during an interview for the 50th anniversary of the march in 2013.

  • "The March on Washington was the part of the strategy to demonstrate that the majority of people in America were ready for change."

The last word: "Many of us were coming fresh from the heart of the Deep South, some of us fresh from jails," Lewis told me in 2013, ahead of the march. "We had seen people beaten, arrested and jailed and we wanted to send a powerful message that things had to change."

  • "I leave for Washington tonight and I go back with the greatest sense of hope and greatest sense of optimism and part of it is what I have witnessed over the past 50 years. I’m very optimistic about the future."
2. Catch up quick

Last week, growth and momentum stocks underperformed value stocks for the first time in six weeks as the S&P 500 posted its third straight weekly gain.

  • This week dozens of companies will report earnings, including Microsoft, Intel, American Express, Tesla and Twitter, and Congress returns to session, with the increasing or decreasing likelihood of a new stimulus bill being passed potentially guiding the market. (CNBC)
3. Americans split on returning to work

Reproduced from CivicScience; Note: ±3.3% margin of error; Chart: Axios Visuals

Americans' comfort level with returning to their offices for work breaks down along a number of interesting demographic lines, new data from research firm CivicScience show.

Details: Men are 20% more likely than women to prefer returning to in-person work and young people (ages 18–24) are the most likely to prefer returning to the office.

  • 42% of young people 18-24 say they would prefer going back to the office rather than staying remote or even having a combination of both options.
  • The youngest workers are also the most likely (44%) to say they have been significantly less productive than usual working from home.
  • Just behind the youngest respondents, 32% of Americans over 55 say they would prefer returning to the office — four and eight percentage points higher than respondents ages 35–54 and 25–34, respectively.
  • 48% of U.S. adults overall working remotely during the pandemic say they have been just as productive as usual.
4. Airlines' social distancing policies are starting to separate them

Reproduced from CivicScience; Chart: Axios Visuals

U.S. airline shares have largely traded in lockstep for most of this year, but diverging attitudes on layoffs, compensation and social distancing could create more stock price separation between the four largest airlines.

Driving the news: During its latest earnings call Delta CEO Ed Bastian said the airline will be extending its policy of leaving middle seats open through at least Sept. 30, touting a new campaign that Delta is "Setting the standard for safer travel.''

  • "The space on board the plane, the blocked middle seats, has gone to the No. 1 reason why customers are choosing Delta,'' Bastian said on the earnings call.
  • Several airlines, including Southwest, JetBlue and Alaska, are limiting the number of passengers per flight, but not all are explicitly blocking off middle seats.

By the numbers: New data from CivicScience show 80% of all U.S. adults surveyed think airlines should not be booking flights to full capacity as American and United recently announced they will do. (Though as I reported in May, American's official policy was only that it would "try" not to book 50% of middle seats "when possible.")

  • American's stock surged in early June, but has sold off more than its peers since.
  • American and United now have the worst stock performance year to date among the big four, down 58.5% and 61.5%, respectively.
  • Southwest's stock is down 36.8% and Delta's is 50.8% lower.

Watch this space: CivicScience also found more than 60% of Americans don't plan to fly in the next six months.

What's next: American and United are poised to lay off 25,000 and 36,000 employees, respectively, after Sept. 30 when a deadline imposed by their pact with the government for accepting billions in taxpayer dollars expires.

  • Delta has said it may not impose layoffs after 20% of its workforce agreed to early retirement and is asking pilots to take a 15% pay cut.
  • There are no reports that Southwest, which has never laid off or furloughed an employee, has alerted any employees of possible layoffs yet.
5. Massive locust plague poised to cut multiple countries' GDP

Swarm of desert locusts in Sanaa, Yemen, in July. Photo: Mohammed Mohammed/Xinhua via Getty

Locusts in swarms the size of Manhattan have been ravaging crops through East Africa, the Middle East and South Asia and could be "a bigger threat in some of these countries than Covid-19," according to Gro Intelligence CEO Sara Menker.

What's happening: The impact of the locusts is starting to eat into the respective countries' GDP and have a devastating effect on local economies.

  • Gro Intelligence analysts tell Axios they are expecting "significant impact to agricultural production in India, along with Pakistan and East Africa."
  • India recently surpassed Brazil to become the biggest sugar producer in the world and about 40% of the planted area of sugarcane is in a main agricultural province currently under threat from locusts.
  • In June, Fitch Ratings warned that locusts could shake east Africa’s macroeconomic stability.

Yes, but: "Locust outbreaks in the significant cereal and protein exporters are rare, so significant disruptions in the international food supply chain are unlikely," Gro analysts note in an email.

  • "However, locusts may significantly impact countries which already face food insecurity, which can lead to localized supply shocks rippling through the international economy due to, for instance, currency crises or increased migration."

Why it's happening: The massive increase and spread of the locusts is linked to climate and climate patterns, Menker says.

Between the lines: Dino Martins, executive director of the Mpala Research Centre in Kenya, calls the locusts a warning from nature.

  • "As terrifying and as dramatic as they are, there is a deeper message, and the message is that we are changing the environment," he told the Harvard Gazette, noting local environmental degradation, overgrazing, deforestation and the expansion of deserts are creating ideal conditions for more locusts to breed.
Dion Rabouin

Thanks for reading!

Quote: "We rise in glory as we sink in pride."

Why it matters: Andrew Young, the fourth man from the left and the last living king pictured in Bernice King's photograph, said the above quote.

  • Young has served as the executive director of the SCLC, mayor of Atlanta, a congressman and ambassador to the United Nations.