- Washington Post – Tracking Hurricane Florence
Hurricane Florence has been rapidly intensifying on its path to the East Coast and is forecast to make landfall as a Category 4 hurricane Thursday night or Friday morning. Major hurricanes rarely strike that far north on the Atlantic Coast, where Florence is heading. Since 1950, only four hurricanes were a Category 3 or higher when making landfall between Norfolk Virginia and Savannah Georgia.
Summary
In 2017, hurricanes Harvey and Irma sent crude oil up nearly 9.5% within the first month. Only two other hurricanes had sent crude oil at least 5% higher. Bret struck Corpus Christi, Texas in 1999 and saw oil rise 11.7% in 23 days before the next named storm hit. Jeanne struck Florida and then traveled north along the east coast. Crude oil rose 15% in the first 30 days then fell sharply over the next 50 days.
Major hurricanes are rarely market events. We look at the performance of 10-year yields, the S&P 500, TIPS breakeven spreads and property & casualty insurers.
Comment
Major hurricanes bring the spectacle, media coverage, and warnings but rarely turn out to be major market events. The chart below shows the change in U.S. 10-year yield in the 30 trading days after major hurricanes since 1980. The line size reflects the strength of the storm at landfall.
Most storms saw Treasury yields stay relatively range-bound. A notable exception was Hugo, which hit North Carolina as a category 4 and ultimately saw the 10-year yield fall almost 40 bps.
The S&P 500 has seen muted responses to major hurricanes as well, although Hugo set an interesting precedent. The storm arrived just two weeks before the October 13 mini-crash which was unrelated to the storm.
Inflation protection markets to appear to see a bid in the wake of major storms. 5-year TIPS breakevens spreads have widened in the 30 trading days after three of the last four major hurricanes.
The property and casualty insurance industry tend to see a relief rally as headlines about damage totals subside and reality sets in.