“Go back to your country!” It’s an increasingly common slur directed at Americans of Asian descent, creating a chill in the community. So much so that it’s possible companies like Sturm Ruger (NYSE:RGR) and American Outdoor Brands (NASDAQ:AOBC) will benefit from a surge in demand from Asian Americans fearing retaliatory xenophobic attacks. With this environment, I can’t see a positive outcome for United Airlines (NASDAQ:UAL) and UAL stock for the near term.
Theoretically, UAL stock should be fine. For one thing, the Trump administration secured a phase one deal with China late last year. Though it doesn’t solve all problems, it set the framework for substantive negotiations. Positive relations with other countries – especially if they’re the world number two – is typically a good thing.
Additionally, as President Donald Trump pointed out in his State of the Union address, the economy is booming. Unemployment is down while both GDP and the markets are up. Prior to the coronavirus outbreak, Americans had much to look forward to. For instance, this decade is supposed to usher in a profound shift in social progress thanks to innovations like 5G.
Instead, we’ve turned the page back to God knows when: was there ever a time when Americans collectively acted like feral beasts? I saw one disgusting video where a young woman was trying to strip an elderly lady of her toilet paper, despite that the young woman had plenty in her shopping cart. Sadly, it’s a theme repeated throughout the western, “civilized” world.
Therefore, it got me thinking: what would happen if all Asian Americans were to “go back” to their country? It might be the only lift in UAL stock for a while.
A Breakdown of Mores Hurts UAL Stock the Most
Recently, I watched a video from The Guardian featuring Sonia Zhou. Once actively running a popular Chinese restaurant in Italy, she closed shop due to a severe drop in business. Keeping a brave face, she remarked that “Coronavirus will pass. Ignorance and racism won’t.”
From what I gathered from the video, Zhou is optimistic. Many Italians refused to give into fear and subsequently xenophobia. Unfortunately, the loud, disruptive and sometimes violent outbursts overpower the voices of reason.
Most of the hateful acts that The Guardian reported were at least a few days old. With Italy suffering over 2,500 deaths from the coronavirus, bigotry and resentment will only increase. Surely, this is not great for Chinese tourism, which in 2018 accounted for a total spend of $277 billion.
Back home, our mainstream media emphasizes that the risk to UAL stock involve mass-scale virus-infection concerns. That’s true, but here’s where I believe downside contrarians are missing the point: the coronavirus will fade, but to Zhou’s point, bigotry may linger.
Lost in the 24/7 coronavirus news cycle is that the FBI reported a 16-year high in hate-crime violence recently. Like oil, we now have no shortage of anger. And we also have Asian Americans, who have received backlash from violent members of all races.
As global coronavirus hysteria escalates into racist attacks, I’m not sure why most analysts don’t see the bigger problem for UAL stock. Who in their right mind would subject themselves to this animosity on their vacation?
Plus, the Chinese government may take the choice away from their people’s hands. Recall that during the heightened period of the trade war, China warned against travel to the U.S. Now, they can outright deny it for racism concerns – a great PR tool.
Problems May Get Worse Even Without the Coronavirus
Further, I’m worried about UAL stock because I fear politicians won’t let this crisis go to waste. Obviously, the Communist Party of China has made their unveiled threats against the U.S. A straight-shooter, President Trump typically responds with equal or greater vitriol.
But in doing so, he’s fueling divisions, pitting communities against Asian Americans. For instance, although he defended it, I don’t believe Trump’s usage of the phrase “China virus” is helpful. Technically, he’s correct. However, he can serve the greater purpose by healing wounds instead of pouring salt on them.
Actually, we do this all the time. Who among us has always given a completely honest answer every time we’ve been asked “Does this make me look fat?”
Unfortunately, the weakness of this administration is that we’ll likely hear an unabashedly honest answer. Or worse, a Peloton (NASDAQ:PTON) as a gift.
Maybe this approach works in certain situations but not in geopolitical negotiations. With rising social tensions, Trump has an easy, mutually beneficial leadership opportunity. Whether he takes it or not will help determine the trajectory of UAL stock.
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.
