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Hurricane Irma: Seasonal Economics

Posted by kdadmin on September 6th, 2017.

Hurricane Irma: Seasonal Economics

In five hours, Hurricane Irma will pass just a few miles north of the US Virgin Islands. With sustained winds of 180 mph and gusts hitting 220 mph, the Category 5 hurricane promises to be a monster. A few days later, this storm threatens to reach Florida. I have a lot of friends, and a bit of property, in the path of the storm. Of course, my thoughts, prayers and support go out to everyone in harm’s way.

Many of you have recently reached out to me with support and concern. Thank you. I am relieved to report that my wife and I are presently in London. And will be bypassing Florida, for now, on our way back to Minnesota.

Seasonal Economics

The economics of storm damage are never good. Hurricane Harvey has caused an estimated $185 billion in damage so far. That’s roughly 1% of the USA’s Gross Domestic Product (GDP). Hurricane Irma could be even worse with some economists estimating its financial cost at several tenths of a percent per quarter for several quarters. The current trajectory of HurricaneJose seems less threatening, but things could change.

With GDP for 2017 estimated to increase by 2.3% to 2.8%, how these hurricanes will impact things over time remains to be seen. Especially as storm damaged areas often experience a brief resurgence once the wreckage has substantially cleared; though that can be years off.

The stock market, for its part, has remained in the doldrums this past August. Domestic stocks, foreign stocks, and real estate investment trusts continued to under perform the long term bond markets. Save a brief blip in foreign stocks, this has been true since this past March.

Hurricane Irma Seasonal Economics

Where to Go From Here

Projections for stock market returns remain poor through 2019 and the headwinds will likely grow as the Federal Reserve escalates the rate at which it retires debt. This is how the market works. Given that the economy has never experienced this extent of financial unwinding, caution remains the clear choice.

For the more aggressive among you, there will almost certainly be economic opportunities in the markets again. Though they won’t likely manifest as the “growth stock” bull market mantra in the near term.

In fact, you may just find that your most rewarding opportunities come from helping those recently devastated by the natural disasters in the Gulf Coast states or by the forest fires in the Pacific Northwest. Many people find that charity is a necessary and satisfying component of being able to Live the Life You Love.

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