A sunny day can make you feel good, and a cold, dreary one can put you in a funk. As it turns out, these emotions are reflected in consumers’ financial decisions as well.
Some studies have even concluded that bad weather can have a depressive influence on an investor’s state of mind, and even Wall Street analysts are less likely to make stock market recommendations on days with dreary weather.
[CLICK HERE to read the article, “Study: How weather can impact the stock market,” from The Weather Network, Nov. 10, 2015.]
Although it sometimes seems like the market is as unpredictable as the early March weather, we believe it’s never a good idea to make decisions based on temporary economic trends or the day-to-day temperatures. This is one of the reasons why it’s important to work with a financial advisor. As your financial professional, we can provide a sounding board to help ensure the decisions you make are right for your long-term financial goals.
One weather pattern that sticks around for much longer than a day, and has actually been proven to have an effect on the U.S. economy, is El Niño. The warming of sea surface temperatures in the Pacific Ocean near the equator can bring good and bad news.
A stronger El Niño translates to calmer winters in the U.S., which means less storm damage and lower heating costs. As a result, Americans are more apt to get out and spend more money, travel more and employers tend to post more new jobs. Milder winters also lead to higher productivity in the construction and manufacturing sectors.
This year’s El Niño is among the largest in recent decades, often compared to the one in 1997 which boosted the U.S. economy by nearly $18 billion. One investment manager projects that this year’s El Niño could add a total of $30 billion to the economy during its 2015-16 season.
[CLICK HERE to read the report, “El Niño Could Add $30 Billion to U.S. Economy,” from Guggenheim Partners, January 2016.]
[CLICK HERE to read the article, “El Niño’s likely effects on the weather, US economy this year,” from CNBC, Jan. 14, 2016.]
However, El Niño’s warming trends are not beneficial to all industries. For example, when temperatures increase, fish tend to migrate to deeper waters and can reduce supply. In turn, that can impact poultry supplies that depend on fish meal.
The ripple effect goes on and on across many industries. Milder temperatures also are a negative for natural gas prices.
This year’s El Niño could eventually evolve into an opposite weather pattern, known as La Niña. La Niña features drier, warmer conditions for the Midwest and Plains, which can increase the risk of severe drought and short crops such as corn, soybeans and wheat. When these products suffer production losses, their markets tend to rally due to higher prices for less stock.
In other words, it’s our belief that what’s bad for the farmer frequently is good for the investor. Not only are weather patterns hard at work, so are market forces.
[CLICK HERE to read the article, “How El Niño Will Impact Food Prices and Food Stocks,” from U.S. News & World Report, Nov. 30, 2015.]
[CLICK HERE to read the article, “Ample grain stocks could dampen impact of El Niño/La Niña shift,” from Reuters, Feb. 1, 2016.]
This all illustrates the importance of diversifying your investments. Any one factor — be it weather, economics or politics — can yield both good and bad impacts across investment markets. As your financial professional, we’re here to address any questions you have, rain or shine.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.
The information contained in this material is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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