What Hurricane Irma could mean for stocks

Hurricane Irma has many fearing for the worst as the storm barrels towards Florida. It has already caused at least 11 deaths.

Beyond the human toll is the economic damage. Currently, estimates for the total cost of the damage run as high as $300 billion, which would be a record. This in turn is likely to have mixed results for the various companies underlying the stock market.

“Major U.S. hurricane landfalls have had less significant impact on aggregate market performance (~2% decline) given the subsequent pick-up in disaster-induced public and private spending,” JPMorgan’s Dubravko Lakos-Bujas said. “The most significant impact on equity performance is seen at the stock and sub-industry level.”

Some companies see a jump in costs as they repair businesses. Other companies generate more business as they supply the products and services needed in the rebuilding effort.

“The largest outperformers include industries tied to replacing and/or repairing existing capital stock (e.g. Energy Equipment & Services, Communication Equipment, Autos), transportation and logistics (e.g. Distribution, Air Freight, Trading Companies), and construction (Basic Materials and Engineering),” he added.

Much of the backstop in the economy and the markets is based on the idea that rebuilding is stimulative. Households and businesses suddenly find themselves spending much more on what could’ve been routine maintenance.

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

Read more:

• US – Iran – Iraq tension remain the main driver of the stock market today
• How top market players on Wall St think 2020 will look like on financial markets
• Money Flow before the start of the new trading week
• Cincinnati Financial Corporation (CINF.US) -Opportunity for long positions
• Asia stocks gain as Fed signals no rate cuts in 2020