Hurricanes, Natural Disasters, and Stocks - September 19, 2018
Hurricane Florence slammed into the Carolinas. Estimated damage may run between $17-22 billion (CNBC, Moody’s), but the forecast could be conservative.
The human toll in loss of life and lives permanently altered is incalculable. It’s something we all grieve.
But do large natural disasters change the trajectory of the overall stock market?
S&P 5002 performance following the 15 costliest hurricanes that made U.S. landfall—
Three-month and six-month performance following the storms – positive 13 times
Median rise after 3 months: 5.5%
Median rise after 6 months: 8.6%
Source: LPL Research, Past performance is no guarantee of future performance
Notably, market performance suffered in the wake of Hurricane Ike, which made landfall in Texas in September 2008. Blame steep losses that followed on the financial crisis, which sent the economy into a downward spiral.
The answer to the question ultimately depends on how storms may affect longer-run economic growth.
They can have a short-term negative impact on the economy, as economic activity slows in the affected region. We sometimes see a spurt of growth tied to rebuilding efforts.
Longer term, the data suggest there has been no appreciable impact on the broader market and the U.S. economy.
The human toll, however, is tragic and shouldn’t be underestimated.