When Hurricanes Hit Stock Markets
Hurricane Marco is on course for Texas, through Mississippi; 65mph winds; 14 fatalities; $8.2m in damage and counting. Tropical Storm Laura will be worse; bigger, badder, and making landfall also along the rustbelt. Yes, extreme weather is next in 2020!
The boffins are hard at work on disaster models, calculating the economic impact of these storms. It’s not an exact science, but estimates are between $2 and $5 billion. We should care about this, because we’re only at the start of hurricane season!
The Wall Street Wise are watching the weather, and a few stocks. Accor, InterContinental Hotels and Host Hotels will sell a lot of rooms to displaced families, if not rescue workers in town. Home Depot, Lowe’s, and Big Lots will sell a lot of replacement furniture this summer.
If we look at the historic data, however, consumer discretionaries wash up worst after a cloudburst. We’re talking restaurants and makers of brand clothing, especially which have outlets concentrated in the worst-hit regions. Dunkin’ Donuts is often a prime example.
Laura and Marco have forced the evacuation of offshore energy platforms in the Gulf. This puts 58% and 45% of drilling for oil and natural gas on hold, respectively, so if demand isn’t hit as hard– or, in other words, if these storms aren’t on course to hit habited land, then the prices of these fuels will go up (ceteris paribus). It looks like a disproportionate demand-hit is on the way, so prices could go down.
We hope not, but this is what event-driven investing is all about. If donating some of your profits to the relief efforts satisfies your ethical investing filter, awesome. We’ll keep you updated of developments.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
