How The Stock Market Typically Reacts To Major Hurricanes

Hurricane Florence made landfall in North Carolina early Friday, and investors will be watching closely over the weekend to see just how much damage the storm does. At Category 1 status, rain and flooding are likely the primary concern; investors are optimistic the storm will not have a lasting impact on the market.

Even the 15 most devastating U.S. hurricanes of all time have not made much of a mark on the S&P 500, according to LPL Research. The firm found that in the one month following the 15 most costly hurricanes in U.S. history, the S&P 500 has averaged a 0.6-percent gain. Looking ahead three months and six months, that gain increases to an average of 2.6 percent and 5.5 percent, respectively. 

Infographic courtesy of LPL Research. 

Hurricane Katrina is the most costly hurricane in U.S. history, inflicting an inflation-adjusted $160 billion in damage. Yet after a one month post-Katrina decline of just 0.2 percent, the S&P 500 bounced back to gain 3.1 percent over a three-month stretch and 5.7 percent over a six-month period.

Other than Katrina, 2017’s Hurricane Harvey is the costliest U.S. hurricane in history, causing $125 billion in damage. The S&P 500 bounced back even stronger after Harvey, gaining 5.5 percent in three months and 9.6 percent in six months.

“As tragic as major hurricanes can be, they appear to have little immediate impact on equity prices,” said LPL analyst Ryan Detrick.

Early indications suggest those in the path of Florence may have avoided a worst-case scenario. The SPDR S&P 500 Growth ETF SPY gained 0.1 percent in early Friday trading, and history confirms investors are right to shrug off the impact of Florence.

Related Links:

Generators To Insurers: Trading Tropical Storms

A Shaky Start To The Worst Month Of The Year For Stocks