With the stock market sensitive to natural disasters, it’s time to take a look at how hurricane Harvey may impact the stock market in the United States. This is a natural disaster of historic proportions in the Houston, Texas and surrounding area. How this will play out in the US economy is yet to be determined.
To start, the New York Post has reported that stocks of insurers and auto giants have taken a hit. Once refining activities came to a halt throughout the Texas coastline, energy stocks lost significant value. With refining activities virtually halted, this means that there is less of a demand for crude oil products a dwindling supply of refined oil products, such as gasoline. The dip for some energy stocks was 3-4%, while some insurers saw a decrease in value of around 2%.
Both Ford and General Motors also saw volatility in their share prices, potentially as a result of hurricane Harvey. With part makers just over the border in Northern Mexico, there is concern that the supply chain for parts is going to become disrupted because of the hurricane. Car retail stores throughout Houston shut down during the lengthy storm. The Autonation chain closed down a total of 18 locations for the duration and saw a decrease in stock worth, dipping down several percentage points.
The good news for stock holders is that natural disasters impact the stock market in both positive and negative ways. While the market for insurers and auto giants may dip temporarily, the stock market for other industries began to rise.
Consider the number of homes and businesses that are going to need to be rebuilt, and there’s no surprise that stocks such as Home Depot and Lowe’s began to rise after the storm ripped through Texas. Home improvement stocks are going to continue to rise as the need for materials will continue to grow.
The stock market can move up and down fast, and a few percentage points for a week or two isn’t likely to cause any long term damage. What will be interesting to see is how long it is going to take for oil refineries to get back up to full speed and how this is going to affect gasoline prices.
In any natural disaster, it can be hard to predict what prices are going to suffer first. As the hardest hit area of Texas is oil refineries, gasoline prices have already started to rise.
Once gasoline prices start to rise, this can cause more panic within the economy. When gas prices go higher, travel costs go up. This means that the travel industry can take a hit, especially for long distance travel. Airline tickets can rise and more people are apt to stay at home than drive long distances.
On a positive note, there are stocks that are expected to rise after the disaster in Texas. According to 24/7 Wall Street, Clean Harbors Inc., which has a number of operations along the Texas coast, is the biggest operator of hazardous waste in the United States. With the mess currently in Texas, Clean Harbors Inc. (CLH on the stock exchange) is going to be a busy, profitable company for some time in upcoming months. US Ecology is another company in the area, (ECOL) and they handle the treatment of both hazardous and non-hazardous waste. This stock is expected to rise and is considered an excellent buy at this time.
Companies that offer waste management services are expected to fare well during natural disasters, while those that offer home or commercial building supplies will also come out on top. The travel industry may take a short hit, but once gas prices stabilize again this shouldn’t be a big factor for the overall stock market. The benefit of such a diverse stock market is that while one side may take a hit after a natural disaster, the other side rises up.
In general, the stock market isn’t deeply affected by Hurricane Harvey. With the cleanup efforts already underway, the market is rebounding on all counts. Gas prices will stabilize, and the travel industry isn’t going to be impacted for long. If nothing else, the home improvement sector stocks will continue to rise, as supplies will continued to be needed for months to come.
Regards,
Ethan Warrick
Editor
Wealth Authority
