If Trump doesn't move to console the nation, here's what may happen to his precious stock market

Social unrest must not be ignored by investors because of their various effects. And it shouldn't be ignored by the enthusiastic golfer who occupies the Oval Office either.
"Does it justify [social unrest] another correction that we saw recently? Yes, this correction could possibly go further," said Matthew Gerken, geopolitical strategist at independent research firm BCA Research. Gerken said in Yahoo Finance's The First Trade, the chances are high, we could see a 10% correction as the market affects the impact of social unrest on the already troubled economy.
Countless experts believe it is wise for President Trump to remove his stubborn mantra for law and order, which he repeatedly spat out during this period of heightened social unrest, and to take on a role that presidents often assume for the country in difficult times - healers in Chief. Not only would it be right for society (and yes, politically for you political strategists out there preparing for the November elections), but it would also make a huge contribution to healing an economy that COVID-19- Pandemic has entered a recession.
President Donald Trump walks past the police in Lafayette Park after being in front of St. John's Church across from the White House in Washington on Monday, June 1, 2020. Part of the church was set on fire during the protests on Sunday evening. (AP Photo / Patrick Semansky)
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At least for Trump, a warm, fuzzy person can protect the valuable stock market that is so dear to him at the moment - especially if there is an opportunity to tweet about a new record high like he did for the market last week (before the market) Nasdaq has done meltdown Thursday). If not, investment professionals like Gerken told Yahoo Finance that the stock market could face a long, hot summer marked by fiery volatility and the death of the buy-dip mentality that has returned in recent months.
Gerken, who examines past periods of social unrest and the economic impact, sees three risk factors for the markets related to this recent wave of social unrest:
Weakening consumer confidence: Gerken believes that consumer confidence and economic activity may “deteriorate” in the face of historical national unrest. The recent slight increase in consumer expectations could turn around. However, this has not yet happened. US consumer confidence for early June improved more than six points from May, according to the University of Michigan.
Trump's poll continues to drop: If Trump's tough line towards the demonstrators persists, Gerken believes that the president's chances of re-election could "decrease permanently". This would trigger a wave of analyst downgrades on long-term earnings expectations, presumably because a president Joe Biden would mean higher corporate taxes.
Investor expectations have been shaken: Gerken explains: “A mistake could lead to unrest reaching an unknown critical threshold, which makes investors afraid of stability in the United States. The US debate has gone from racism to "fascism" as Trump's opponents criticize him for his authoritarian rhetoric and use of armed forces to secure parts of Washington, DC. Structural factors are driving the riots, which means that they can smolder and additional incidents could cause them to flare up all summer and fall. The use of troops to suppress unrest - as in any country at any time - could easily lead to bloody mistakes. "
Investors gave Trump a taste of what could be in store if he didn't weaken his public image. The Dow Jones Industrial Average fell more than 1,800 points on June 11 as fears of prolonged social unrest, unemployment and COVID-19 torpedoed the glowing rally from the March 23 lows. All Dow stocks declined, especially banks like JPMorgan and industrials in Boeing. The only S&P 500 stock on Thursday was the grocer Kroger.
The Small Cap Russell 2000 index of primarily US-based companies fell 8% over the course of the week, worse than the S&P 500's 5% decline.
Although the Dow regained 477 points on Friday, Wall Street remains afraid in mid-June. The CBOE Volatility Index - also known as the anxiety indicator known as the VIX - closed the week with a more than one-month high of 36.
"There is no question that the stock market is in a CRITICAL JUNCTION ... and how it will behave over the next week or two will be very important to the market later this summer (and beyond)," said Miller Chief Tobacco Strategist Matt Maley.
How it is doing could be an extension of how the commander-in-chief will behave in the coming weeks.
Brian Sozzi is the editor-in-chief and co-moderator of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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