Hurricane Harvey: Impact on the Market & Investment Managers

By Sherwin Nelson Clemons   |   September 6, 2017

Hurricane Harvey market impact

We’ve watched the news from Texas over the last week with heavy hearts. The damage from Hurricane Harvey, torrential rains, and unprecedented flooding is almost incomprehensible. Hurricane Harvey has caused significant upheaval for many individuals, families and communities in its path. The damage is likely to be long lasting and in some cases life-changing. JOYN team members are helping family and friends and donating to local and national charities to help our neighbors in Texas and Louisiana.

But as heartbreaking as the images from Houston and other areas are, we believe the market impact from this devastating storm will be much more transitory and smaller in scale than a storm of this size might suggest. You may have concerns about how this storm might affect your investments.

AFFECTED INVESTMENT FIRMS SUCCESSFULLY ACTIVATE THEIR DISASTER PLANS

We’re happy to report that all of the investment firms in the path of Hurricane Harvey have avoided the worst of the devastation. No lives have been lost, but many of their businesses did suffer material damage from the storm.

Before we invest with any investment manager, we make sure the managers we hire have a plan in place for natural disasters like Hurricane Harvey that could interrupt their work. We assess their operational due diligence and disaster plan. Business continuity planning (BCP) allows for the continuation of critical elements of business during extreme events such as hurricanes, power outages, terrorism or other material events.

We’re pleased to reassure you that all of the investment firms we use in the affected area have activated their BCP and have reported back that they’re conducting “business as usual.” This continuity helps ensure the safe management of capital for clients whose assets are invested with firms located in the affected region.

HARVEY TEMPORARILY CLOSES LOCAL OIL & GAS REFINERIES

Houston is a major oil refinery hub. A total of 2.5 million barrels of refining capacity was taken offline in advance of the storm; flooding has halted the production of 300–500 thousand barrels at Eagle Ford; and major ports including the Houston Ship Channel and the Port of Corpus Christi were closed due to the storm limiting exports and imports.

While Hurricane Harvey may cause higher prices for certain products and/or reduced earnings for affected companies, we believe these issues are likely short lived and should not affect the markets over the long-term.

MUNICIPAL BOND MARKETS LIKELY TO WEATHER THE STORM

While Harvey has had a significant impact on many communities, the market’s reaction to bond prices has been fairly muted. Two factors buoy our confidence in the municipal markets. First, Texas carries a ‘AAA’ rating from both S&P and Moody’s. Second, according to Bloomberg, over the last 75 years, no natural disaster has led to the default of a municipal bond. We believe it’s unlikely Texas will be an exception to this precedent.

DONATIONS TO HURRICANE HARVEY VICTIMS

If you’re moved to make a substantial contribution to help those affected by Hurricane Harvey—or indeed, any significant charitable donation—we can help you do so in the most tax-advantageous way possible. Please speak with your advisor to learn more about your options.

A REMINDER ABOUT WHAT’S MOST IMPORTANT

Events like Hurricane Harvey help put things in perspective. As we watch those suffering and pray for the families who lost loved ones, we’re reminded what’s most important and how much we have to be grateful for—the safety of our family and pets, a dry home, a working car, our own bed, and the security of our investments. Recovery may take time, but we believe people and the markets are resilient.

If you have any questions, please contact your investment advisor.

Sherwin Nelson Clemons

About the Author

Sherwin Nelson Clemons is the VP of Advisory Services and a Senior Financial Advisor at JOYN. Known for her calm spirit in tense or emotional financial situations, Sherwin enjoys making complex planning ideas simple and relevant to her clients. She is a Certified Financial Planner® and a Certified Divorce Financial Analyst®.

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