Another Hurricane? Buy the Dip

Investors will look at the damage from Hurricane Irma as insurance companies (and hedge funds) start to close their eyes and we start the cleanup process. On the economic calendar, we have CPI, Retail Sales and PPI.

Hurricane Aftermath: After destroying islands in the Caribbean last week, Hurricane Irma made landfall this weekend along the west coast of Florida. The 2^nd major hurricane in 2 weeks to make landfall in the US. In the aftermath, insurance companies will continue to determine how much this will affect their bottom line and reinsurance company’s bottom lines. Similar to Texas, a substantial amount of homeowners do not have flood insurance. We will also pay attention to airlines and leisure companies as the airports may be damaged and hotels may not be able to reopen so quickly. We should also watch the US Dollar as the larger the amount the Federal government kicks in with emergency aid, we will see a weakening of the dollar. Also watch Treasury’s as the 10 Year Treasury note yield is hovering just above the 2% level while gold continues to rise. The more destructive the damage is, we will likely see a larger dip in 3Q GDP. Even though gas has risen since Hurricane Harvey, oil production will likely not be affected as most of the oil rigs are away from the direction of Irma. We should also pay attention to (besides homebuilders) are car stocks as the more flooding we see, similar to Texas, the more cars that will have to be replaced. Your orange juice may also spike, so switch to milk. It does a body good. Beer also, while you’re at it.     

Bank of England and Swiss National Bank: The Bank of England is scheduled on Thursday (9/14) to publish its policy decision, Inflation Report, Official votes and new forecasts or as they call it, Super Thursday (cause their Super, thanks for asking). The Bank of England Governor will also give us his latest outlook as to how the negotiations are going and their thoughts around the ECB’s potential reduction in their Asset Purchase Program. Comments around the program could potentially strengthen or weaken the British Sterling. The Swiss National Bank will also be releasing the latest Libor rate and Monetary Policy Assessment. Data around their portfolio will not be released at this time so you will have to wait a little longer to see that the only institution buying US stocks are the Swiss National Bank.

CPI: Also on Thursday (9/14), CPI is released. The recent hurricanes likely occurred too late to be captured in this data. So don’t worry, the price gouging we’ve heard about will show higher CPI figures next month, before falling in the following months as inflation will continue to be lower than what the Fed would like to see.    

Chinese Data: This week, China will be releasing Industrial Production and Fixed Asset Investment. Investors will monitor the data and the Yuan’s reaction as strong data will put upward pressure on the currency, with the potential for markets to rise globally.

Fed Blackout: This week, there are no public speeches by Fed officials as they are in a communications black out period until the next Fed interest rate statement, which is scheduled for next week.