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Hurricane Season | August 2017

Given a heavy workload and some down time thrown in, I’m barely under the wire for this to be an August column rather than a September column. As I write I’ve seen the news reports of Hurricane Harvey hitting the Texas coast and flooding Houston and other areas. The cost to human life and lives hasn’t begun to be measured yet, but it is certainly devastating. Our hearts and prayers go out to those suffering such loss.
I fear for New Orleans as well. Should there be a little jog in the storm path in the next 24 hours, it could bring renewed devastation to The Big Easy 12 years after Katrina. Does it seem like 12 years to you? It doesn’t to me. Life seems to be spinning with the speed of a tropical storm, and just as inexorable.

Clients have asked me what effect the storm will have on the stock market. As I write this, oil stocks are down and gasoline is up at the pump. I heard today that if Houston’s GDP was measured against countries; it would be the 27th largest in the world. While it would have severe impacts to the US and world economies if the Houston economy were disrupted over the next year, the ‘experts’ are talking about economic recovery being measured in weeks.

The economy should be just fine and not rocked by the recent storm. The market should not see significant impacts either. But one never knows what will change market sentiment. Such is the nature of investing. The market, as we know, will continue to defy predictions.

I’m also asked if the political storms in Washington will affect the markets. Brian Wesbury, Chief Investment Officer of First Trust Portfolios, L.P. is a great friend of Allen & Company and has provided lots of insight over the years into what drives the economy and stock markets. His take on what I call the “Washington Shenanigans” is worth a listen: Click here to watch the latest Wesbury 101 – Political Games and Stocks.
You may recall what I wrote late last year: “the stock market would probably respond to the presidential election with an uninspired “meh” with gridlock to follow.” Clearly the US equity markets have been much more positive from November 2016 to August 2017 than a blasé “meh”, but gridlock, just as clearly, reins.
These two storms, the hurricane on the Gulf coast of Texas and the fussing and finger-pointing in Washington, remind me of a quote from the Jeff Goldblum character in that dinosaur movie. He said something like “nature finds a way” or “life finds a way.”

Yes it does, doesn’t it? Whether it’s calamity caused by natural forces, or man-made disasters planned or inadvertent, life does find a way. After the clouds pass, the sun eventually comes out, and the grass blooms anew. How long that takes, we just don’t know, and I don’t think we’d be any more content if we did.
I do know the clouds can last a long time. In case I had forgotten, I was reminded during a recent reading of a novel of the dustbowl years. “Whose Names Are Unknown” by Sanora Babb reinforced perspective about suffering and poverty in a seemingly never-ending season of drought. Some people in Hurricane Harvey’s path will have their lives changed forever in ways that will leave behind heartbreak and despair, never to recover.

But for most of us, life will go on. As we think about how these ‘storms’ affect us – our life choices and core values, our beliefs, our hopes and dreams, and yes, even our investments, we would be well served to remember to separate ourselves from the noise and stick to our principles that brought us safe thus far. Sending a dollar or ten to storm relief wouldn’t hurt either.
Take care of yourself out there. There will be storms. And new dawns.

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