A Perfect Storm

In the wake of two of the worst storms the U.S. has ever seen many questions linger. We all grieve for the hardships these disasters have brought on millions of Americans, but we also share concerns over if this will have a significant negative impact on the economy.

The immediate effect of Harvey alone will cost $60 to $100 billion dollars from GDP growth for the third quarter as estimated by the Wall Street Journal. Moody’s Mark Zandi estimates that both storms could combine for up to $200 Billion in uninsured damages and lost economic output. That would make them far more costly than Hurricanes Sandy and Katrina combined.

Part of those numbers come from the considerable lost oil production which has had prices moving steadily higher. It is estimated by CNBC that 31% of U.S. refining capacity was taken offline by Harvey, much of it yet to be able to begin production again.

Reports also say that over 500,000 vehicles were rendered inoperable in the storms and 25% of property on the Florida Keys was completely destroyed.

What we find particularly interesting about these storms, however, is how the market has reacted compared to the two previous most costly storms;  Katrina in 2005 costing around $108 Billion and Sandy in 2012 costing around $50 Billion.

After Katrina the S&P dropped roughly 4% in the ensuing two weeks, but ended the year up 1.59% from the time the storm made landfall.

Similarly, Sandy caused a market movement of just over 4% in the following days to end the year up 0.99% from that point.

We know that markets can be a bit shaky when things like this happen, but the strange thing is that this year that same skittish S&P didn’t even blink at these storms and is up around 2.6% since Harvey made landfall.

Strangely enough our market doesn’t seem to be hearing much in general these days; a significant departure from a moody and news driven performance in 2016. The last month has had serious talks about rate movements, multiple natural disasters, and “Rocket Man” lobbing missiles over our allies all while the S&P plods along calmly in normal every-day fashion.

So what gives? Why the dramatic departure from past behavior? I’m not complaining, but it does make you wonder who’s behind the wheel of this market right now and what they’re looking for to keep the train moving.