How do storms impact the markets?
We seem to be in a storm cycle. We just had a couple nor’easters, and it looks like more snow is on the way. At times like these, people wonder just how much weather can affect the economy. Last year was a great case-study. For the previous several years we’d had heavy weather disrupt the first quarter’s economic growth. Last year we had a mild winter, along with low energy prices. Economists were curious whether lower heating bills would boost consumer spending.
It did, but only a little. Much of that money was saved. It turns out that capital spending and job security are a lot more important economically than the weather forecast. Storms may shut us in temporarily, but they don’t keep us down for long. Consumption delayed is not consumption denied. And of course with so much available on-line, we don’t even have to go to the hardware store to buy a snow shovel or ice melt. Amazon will deliver them.
There may still be some disruption from power outages and travel bans, which makes me wonder why we don’t bury our power lines, like the Nordic countries. They have some experience with nasty weather. And, of course, the evacuation out in California is extremely disruptive. In general, though, stormy weather to the economy is like driving in heavy snow: it may make you slide around, but it shouldn’t affect your transmission.
Douglas R. Tengdin, CFA