Right now, Hurricane Irma, after devastating large and small islands up and down the Caribbean, and taking lives, is preparing to hit Florida in a matter of hours.
Hopefully, if you or your loved ones live in the path of the storm, you’ve hightailed it out of the storm’s path and are someplace dry and safe.
If you’re hunkered down or way out of the way on the other side of the country, now is a good time to consider the impact of this massive storm on your investments.
I’m not just talking about a home or vacation house that might be in harm’s way – but all of your investments.
No matter where you live, and no matter the size of your portfolio, Irma is about to have an outsized impact on your bottom line.
Let me show you what I mean…
926.8 Billion Reasons to Be Concerned
Florida is the fourth-largest state in GDP terms. Its 2016 current-dollar GDP was $926.8 billion, about one fifteenth of the total GDP of the United States.
The state also boasted a 3.0% growth rate in GDP in 2016; that’s twice the meager 1.5% the United States managed as a whole.
It’s also a major gateway for international trade between North America, Latin America, the Caribbean, and the rest of the world. Over the last decade, Florida’s merchandise trade has nearly doubled to $143 billion in 2016. It accounted for $68 billion in goods shipped from and through its borders in 2016, ranking seventh in the U.S. for exporting goods produced.
Its major seaports account for 900,000 jobs, $117.6 billion in total economic activity, and generates $4.2 billion in local and state tax revenue.
Additionally, Florida is home to over 47,000 commercial farms and ranches covering 9.45 million acres. The state is responsible for billions in fresh produce, chiefly $1.17 billion in oranges (accounting for 60% of all the oranges in the U.S.).
Irma will destroy parts of southern Florida and could paralyze the entire state, bringing all that healthy economic activity to a grinding halt.
There’s no telling what will happen to the commercial and economic infrastructure, including those very busy seaports, its 12 international airports, the 270,000 miles of public roads, 11,000 bridges, 4,000 miles of oil and gas pipelines, the thousands of oil and gas storage facilities…
This economic paralysis would be on top of the billions of dollars in property damage a storm of this size and strength is capable of inflicting.
Of course, we know all too well what that looks like…
On the Heels of Harvey
Hurricane Harvey just deluged Houston leaving chaos in its wake.
Obviously, experts on the ground are still assessing the extent of the damage, but here’s what we think we know…
According to the Texas Department of Public Safety, more than 185,000 homes were damaged and 9,000 were destroyed.
Throughout Texas, some 30,000 residents were displaced by the storm, and more than 300,000 people were left without electricity.
The refinery industry capacity was reduced, and oil and gas production was affected in the Gulf of Mexico and inland Texas.
At least 700 businesses across the state sustained major damage as well. And even the ones that didn’t still lost money. According to weather analytics firm Planalytics, lost revenue to Houston-area retailers and restaurants alone will come to approximately $1 billion.
Overall, it’s going to cost hundreds of billions of dollars to rebuild. Moody’s estimates that the total economic cost of the storm to be between $81 billion and $108 billion. AccuWeather puts the number at $190 billion.
It’s early yet, but I think those estimates are low. When all is said and done in Houston, I think we’re going to be looking at somewhere in the neighborhood of $250 billion.
And Irma could cause just as much damage, possibly more. Meaning the combined costs of these two storms could reach half a trillion dollars.
That’s going to add to the deficit, interfere with the Federal Reserve’s plan to normalize its balance sheet and continue raising interest rates, get in the way of the Trump administration’s agenda (including tax cuts if some lawmakers don’t want to spend on rebuilding while cutting Treasury income at the same time), and possibly reignite tensions over the debt ceiling.
In short, Irma’s effects are going to be felt around the country – even in your wallet.
What to Do Right Now
The markets are already acting skittish thanks to ratcheting nuclear tensions with North Korea and the lingering effects of Harvey.
Another once-in-a-generation storm could trigger panic selling in markets that already appear ripe for profit-taking.
And as I’ve been telling you for a few weeks, seasonal volatility is about to return to markets as the “sell in May” crowd returns from vacation and starts trading again, and money managers start dumping losing positions and shifting that cash to safer investments as they await their year-end bonuses.
Things could get very bad very soon.
The best thing you can do: make sure you have your stops in place – NOW. Don’t wait. Because if the storm ravages Florida and the markets begin to panic, it’s going to be too late.
And be safe out there.