What is Your Plan to Calm the Demon of Unrest?

The above quote is often attributed to American humorist and writer, Mark Twain. It implies that while details, circumstances and names may change, like events can still occur. I recently finished reading The Demon of Unrest by Erik Larson. The book delves into the turbulent period leading up to the American Civil War, focusing on the political and social tensions that descended our country into irreparable conflict.

The Demon of Unrest portrays a period of widespread societal tension and dissent that sadly, to some degree, rhymes with the realities of present-day America. In 2024, the United States is encountering a variety of political and social challenges as well as growing distrust in our institutions - echoing much of the historical unrest outlined by Larson in his book.

In 1860, South Carolina was the first of 11 states to actually secede from the Union. Economic pressures drove much of the unrest leading to conflict. When the foundational principles of a nation’s economy are torn between the interests of two distinct philosophies, it can amount to financial chaos.

Slavery was an integral part of the southern economy. Looking back, we are astounded by how wrong and immoral this was. As a nation of destiny, this was certainly not God’s plan for America. At risk were the very principles the United States was founded upon – God, Country and Constitution. Our national consciousness compelled us to overcome this national disgrace at a horrible cost.

I’m not suggesting it is time to prepare for Civil War, but rather seek to understand how to navigate such uncertainties in order to secure our financial futures. As the 2024 election is upon us, we remain uncertain about the depth and longevity of inflation, the direction of future of interest rates, escalating wars globally and many other uncertainties including our role within a an increasingly interconnected global economy. These challenges are heightened by deep divisions over political ideology and a host of adjacent, polarizing issues.

In the end, it comes down to pursuing and sacrificing for the freedoms we value most. Recently, I had a client ask me if there was anything that would concern me about investing in the stock market. My answer was simple: “If we lose the rule of law.” In other words, if our constitution goes away, America would be uninvestable. There is already a powerful example of what happens to a country’s economy that has lost the rule of law – China. The rule of law limits government discretion and provides a transparent and consistent legal framework that reduces risk for investors, encourages entrepreneurship, creates jobs and promotes prosperity.

As investors, we can still have confidence in the American system of government. Research shows that in countries with more open and democratic institutions, social unrest events have a negligible impact on stock market returns as opposed to authoritarian regimes.¹ Our open system still sparks profound philosophical debates such as the current discussion to eliminate the filibuster in the Senate. Despite these often-heated debates, our economy and markets are usually able to successfully ignore the noise and keep chugging along.

One interesting aspect shared in The Demon of Unrest is Larson's highlighting of the South's obsession with honor, which he uses to explain the South's reluctance to compromise. The answer to this obstacle resided in one man: Abraham Lincoln. Lincoln exhibited extraordinary strength and conviction at a time when unrest was consuming his country. The same conviction is necessary today in every corner of our system – from Washington, to Wall Street and on to Main Street. All are necessary for us to move forward with faith and confidence that our country, our families and our hard-earned wealth are going to be OK. And working together, they will.

Thanks for reading.

¹ May 10 2021, How stock markets respond to social unrest https://www.imf.org/en/Blogs/Articles/2021/05/10/how-stock-markets-respond-to-social-unrest