Hurricane Harvey was the first major hurricane (defined as a category 3 or greater) to hit the United States in 12 years, and is already on track to be among the top three most costly hurricanes in U.S. history, so it’s natural to wonder how it may impact the stock market and your retirement savings. So far, it has had little impact on the TSP (although how it has impacted the 60,000 federal employees in the Houston area is another story).
In 2012, Hurricane Sandy struck the northeast coast (with the eye wall making landfall right over my home), and cost at least $75 billion in damage and took over 200 lives. Despite its relatively slow wind speeds by the time it hit, it became the second costliest hurricane in the country’s history due to its immense storm surge and sheer width.
In 2005, Hurricane Katrina struck the Gulf Cost, resulting in well over 1,000 fatalities and more than $100 billion in damage. It was the costliest natural disaster the country has ever faced, the deadliest in a long time, and had a major long-term impact on the region it struck.
But the thing that all three storms have in common is that, despite their incalculable impact on the lives they touched, their impact on the stock market was surprisingly negligible. With the market’s value being over $27 trillion, even a storm that causes a hundred billion dollars in damage represents less than a fraction of a percent.
Here’s the S&P 500’s performance over the past month:
The S&P 500 is already higher now than it was when Harvey struck.
Some companies even benefitted. Because Harvey struck eastern Texas, the oil and gas hub of the country, it knocked out considerable supply temporarily. As a result, gasoline prices have gone up, which benefits refining companies like HollyFrontier Corporation and Marathon Petroleum, which are both up over 10% in the last couple weeks.
On the other side, insurance companies have taken a financial hit. Allstate, Chubb Corporation, Traveler’s Companies, and other major publicly-traded insurers have seen declines in their stock prices over the past two weeks due to expectations that their next few quarters will have Harvey-related impacts. This has been less than a 5% price decline in most cases, and history shows that large insurers have bounced back quickly from previous damaging hurricanes.
Already ahead of Hurricane Irma we see similar patterns playing out with insurance stocks falling and some commodity prices on the rise.
If you buy individual stocks in your other investment accounts, you might find some bargains in the insurance industry at this time.
Overall, the TSP has absorbed the impact of the hurricane as though it never happened. All five TSP funds are slightly higher now than when Harvey hit.
Of course, for those living on the Gulf Coast, and particularly the Houston area, this provides little solace. While the hurricane may not have a large financial impact on the nation’s stock market, it has changed the lives for many people that experienced it, with over 50 deaths and many homes lost.
My heart goes out to the 60,000 federal employees who work in the Houston area, and hopefully all of the readers here have remained safe.
NPR recently compiled a list of charities that most directly impact Harvey’s area of impact, which may be a good source of research for those looking to contribute in some way.