The 2017 Atlantic hurricane season was one of devastating destruction, but in the aftermath of Hurricane Irma, a bull market was born. Irma, the strongest hurricane to ever form in the open Atlantic, gave rise to a number of stocks that received a significant boost in the market. In this article we will look into some of the stocks that surged in the wake of the storm, and explore how investors are riding the wave of Irma.
1. Hurricane Irma: Why This Storm Helped Wall Street
As we saw destruction and chaos in the wake of Hurricane Irma’s landfall, trading activity on Wall Street remained surprisingly calm. Amid the screaming press headlines, the story of Wall Street’s resilience flew slightly under the radar.
One of the main factors that helped financial markets weather the storm was the extra precautions traders had taken in advance of Irma’s landfall. After the crippling effects of an earlier storm, superstorm Sandy, had knocked out trading systems just a few years ago, stocks, bonds, and commodities traders were very aware of the risks extreme weather posed. With Irma threatening to upend the Florida-centered region of the United States, traders prepared for the worst — including pushing back trade settlement dates for upcoming contracts so that the market wouldn’t hit a standstill just as it was trying to adjust.
- Clear communication with clients allowed traders to make smart decisions.
- Reducing volatility enabled the market to exist despite Irma.
- Strategically utilized technology kept Wall Street effective.
2. How Irma Unintentionally Gave Us Soaring Stock Prices
1. Weather Drama Causes Market Euphoria
The 2017 hurricane season brought devastation to millions through the wake of Hurricane Irma. But for those savvy enough to take the financial risks, Irma’s path of destruction was not only viewed with concern, but also with potential hope for financial gains. When Irma hit the Florida coastline, the stock of so-called “hurricane plays” began to climb.
Investors watched national news sources like CNN and saw the rising damage toll. They began to buy shares of companies in areas of:
- Home Construction
- Home Improvement Supplies
Publicly traded companies like Home Depot and Home Bancshares quickly saw their stocks rise when the news footage showed damaged homes that needed to be repaired.
2. The Trickle Up Effect
This bonus to those with the insight and fortitude to invest in such stocks had a trickle-up effect. Those stocks rose, so mutual funds that held such stocks saw value appreciation, giving those with 401Ks and other retirement plans gains in their valued funds.
When the storm passed, these stock prices and funds declined, but those who held the right investments had a number of days of above average portfolio value and many short-term traders leveraged the situation for gains.
However, as the storm dissipated, winds of caution blew. Holding stocks through a storm can be incredibly risky, as those potential gains could quickly turn to losses if the path of the storm changes or the damage estimate is higher than expected. Such can be the case of investing into any sector – stormy or otherwise.
3. Surprising Benefits from a Historically Devastating Storm
When Hurricane Sandy arrived in 2012, it presented momentous destruction and disruption to much of the Northeast Seaboard, including coastal states, New York, and New Jersey. Yet, when the dust cleared and assessments of the damage began, unexpected benefits became apparent.
One of these silver linings was the extensive beach replenishment project. Thanks to federal aid, beaches that were wiped out by the storm surge were restored, and elevated new dunes and metal storm barriers created a better defense against the waves.
- Increased Biodiversity – The increased beach size actually led to an acceleration of biodiversity, as shorebirds and mammals gained new hunting and resting grounds.
- Increased Tourists – On top of providing a safer shoreline, these beach revitalisation projects were a huge draw to tourists who wanted to enjoy the newly-built beaches.
The rebound from Hurricane Sandy was also due in part to the sudden rush of new businesses and startups who sought to help in the rebuilding effort. These companies helped to empower local economies, creating thousands of new jobs and bringing in a new wave of investment to the area.
4. What Irma Taught Us About Strategic Investment Opportunities
The hurricane season of 2017 will remain in the public’s collective memory for decades. Nowhere was the force of nature felt more strongly than with Hurricane Irma, a category 5 storm that inflicted devastating damage to the Caribbean. While the suffering of people and communities is tragedy in and of itself, Irma reminded us of something valuable.
It showed us the importance of strategic investment across the region. Such investments, which build resilience in infrastructure and housing in coordination with insurance, are a major factor in mitigating damages from extreme weather events. These investments could have been successful had the region put them in place sooner — and Irma reminded us to never forget the importance of proactive investment.
- Investment in Infrastructure: One of the most common ways to prepare for hurricanes is through infrastructure investment. By bolstering sea walls, updating safe evacuation plans, and other mitigation efforts, communities are more able to survive and rebuild quickly post-storm.
- Insurance Opportunities: Complimenting infrastructure and resettlement investment is attractive insurance opportunities. Homeowners’ insurance, emergency response insurance, and other related products can reduce the risk and cost of property damage before, during, and after a hurricane passes.
- Incorporating Alternative Solutions: With ever-increasing building codes and regulations, alternative solutions – such as hurricane-resistant building materials – are becoming a reality. Communities, and the investors that finance them, can benefit from including these materials in the cost of construction.
Ultimately, Irma serves as a reminder of the importance of preparing for any disaster. By incorporating the lessons of strategic investment, both investors and communities can create weather-resistant planning and further reduce the effect of storms in the process.
After the devastation that Hurricane Irma caused in 2017, it’s comforting to know that at least one positive outcome was that it gave us a bull market. It’s a reminder that difficulty can sometimes give us more than we bargained for, and that a storm of trouble can also bring us moments of hope.