Rising Hate Crimes an Ugly Headwind for GE Stock

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Like the coronavirus from China, it’s no surprise that the ensuing market bloodbath has aggressively attacked the old and vulnerable. At one point, General Electric (NYSE:GE) was a revered American industrial giant. Now, the company is just American, with its previously associated characteristics no longer having much meaning. So far, GE stock is down nearly 30%.

Investors Can Do Better on the Dip Than GE Stock

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To be fair, CEO Larry Culp and his executive team have forged ahead under extremely difficult circumstances. In order to save the company, Culp made painful but necessary cuts. And to management’s credit, they started to generate meaningful momentum. For instance, in the final calendar quarter of 2019, GE stock jumped 30%. Before the coronavirus attacked the markets, shares were up 17% for the new year.

Americans love underdog stories and General Electric was in the middle of pulling out a remarkable one. Sadly, the coronavirus is not just a health crisis but also an economic black swan. As it relates to GE stock, the disease known as Covid-19 has utterly destroyed airliners. That’s terrible news because it implies fewer orders for Boeing (NYSE:BA), which in turn negatively impacts GE.

Here’s some food for thought: BA shares have plummeted 48% for the year, boding ominously for General Electric.

Clearly, the biggest demographic impact is the effective shuttering of Chinese tourists. As the Washington Post noted, “They constitute more than 10 percent of the global tourism industry and are the fastest-growing market for long-haul flights.” In fact, so powerful is the reach of Chinese tourism that it revitalized old, forgotten Italian villages into veritable hotspots.

That joyride will end now, and the pain will linger for a very uncomfortable reason.

Scapegoating Might Reverberate Back to GE Stock

I shudder to think about Chinese and all East Asian people in Italy right now. At time of writing, the country has 12,462 people and 827 deaths related to Covid-19. Today, the Italians are hunkering down, their country closed to the rest of the world. Tomorrow, they’ll be looking for someone to blame.

Believe me, I’m not blaming them for seeking a scapegoat. Such behaviors are as old as time. My concern is that they will physically act upon their impulses, creating waves of fear among not just Chinese tourists but among Asian tourists in general. Obviously, that would further pressure airliners, invariably imposing headwinds on GE stock.

And don’t think this is hyperbole. In Italy and throughout the western world, nationalistic and racial identity movements have sprouted like wildfire. Unfortunately, the U.S. is hardly immune to this ugliness.

In an NBC News op-ed, health policy researcher Matthew Lee decried the growing – and alarmingly accepted – bigotry against Asian Americans. Citing a medical journal by Carlos del Rio, MD and Preeti N. Malani, MD, he wrote that it implied that negative biological differences exist between the races.

This is exactly the kind of “scientific” speculation that got Dr. James Watson – one of the fathers of DNA – scorched for racism.

Sociologically, the message could not be clearer. Liberalism and tolerance apply to everyone except Asians. They are fair game.

This is creating a very dangerous environment. If this situation worsens, travel demand from Asia will certainly decline, eventually hurting GE stock.

Hoping for the Best but Expecting the Worst

Some of you may disagree that this controversial headwind may play out. If you do, I simply ask that you consider history, which typically repeats itself in some fashion.

Vincent Chin is a name that is etched into the collective memory of Asian Americans. In 1982, two men bludgeoned Chin with a baseball bat until his head split open. His crime? Thinking he was Japanese, the men blamed him for their job loss.

At the time, it was a high profile and shocking incident, reflecting that America had a long way to go toward racial tolerance. Are we better today? Recent hate crimes suggest no.

Fortunately – if I can even say that – the hate crimes are relatively minor in scope. But if we have another Vincent Chin incident, you can bet that this will have a lasting impact on Asian tourism demand. As I stated, such an impact will reverberate down to GE stock.

Let’s hope it doesn’t get there. Frankly, though, I’m not optimistic.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.

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