Great article I read while stuck in the Atlanta airport yesterday http://ow.ly/fhLCe
Collecting children’s books for a prog that allows our military moms & dads who are deployed to read to their kids! http://ow.ly/f2JFM
Wells Fargo to give $1 mill Hurricane Sandy relief. Nice to work for a comp who helps those impacted by this awful storm http://ow.ly/eWjac
Comments on the economy and the market. Special report to come on impact of the storm http://ow.ly/eUKDq
Last Week’s S&P 500 Index: -1.5%
The phone is already ringing. The questions are being asked. Even though the U.S. stock market is still closed at this point due to Hurricane Sandy and her aftermath, some investors are looking for opportunities in the devastation. Those with more trading-oriented mentalities in particular want to know what sectors or industry groups might benefit from either the cleanup or the rebuilding efforts.
Clearly, some companies will benefit from the cleanup process and others will see increased revenues from the rebuilding process. In the short term, companies selling emergency supplies like plywood, plastic tarps, batteries and mops will likely see increased business as those affected by Sandy readied themselves and now try to deal with the aftermath of the deadly storm. But these products tend to be low margin, less profitable items for home improvement retailers. Other businesses, like restaurants, may be negatively impacted as their locations shut down due to loss of electricity, flooding or other types of damage.
Most preliminary estimates of the damages appear to be in the $10-$20 billion dollar range but we have seen predictions as high as $100 billion. As a reference point, the National Oceanic and Atmospheric Administration (NOAA), a governmental organization housed within the Commerce Department, pegged the cost of 2005′s Hurricane Katrina at $81 billion. Much of Sandy’s damage will be covered by insurance companies. Many businesses will be shut down for days or weeks. Some might even be closed for months.
Initially, the economic consequences of Hurricane Sandy will likely be to dampen economic activity in the affected areas. Some sources are predicting losses in daily economic activity of close to $10 billion. The magnitude of the effect will be hard to gauge until a better evaluation of the damage to the transportation infrastructure and power grid are reported in coming days.
But consider the fact that the size of the American economy is approximately $15 trillion. If we assume Sandy did $100 billion in damages, that represents less than 0.7% of total annual domestic economic output. While the devastation doled out by this massive storm has certainly been meaningful, it is unlikely that the ebb and flow of the overall economy would be impacted in a major way or for an extended period of time.
We would recommend that long-term investors stick to their plan and not try to make significant changes to their portfolios in an attempt to capture quick profits in the wake of this week’s hurricane. The market has experienced a minor pullback over the last few weeks and could very well see more downside when trading resumes on Wednesday. We continue to see pullbacks as opportunities to accumulate stocks in sectors sensitive to a continuation of the U.S. and global economic recovery. Looking out over the next 12 to 15 months, we see good upside from current levels to our year-end 2013 target range for the S&P 500.
We recommend that investors seek out quality companies for long-term investment and not turn into storm chasers looking for a thrill ride in the stock market.
Scott Wren, Senior Equity Strategist
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Updated comments on last week’s market performance http://ow.ly/eJJeY