Three Rising Industries Amidst the Market’s Nosedive

I hope you all had a relaxing Labor Day weekend because the markets are getting hit full force today.

Over the past few days, the long-awaited – or should I say long-dreaded – U.S. tariffs on Chinese imports came into official effect. And the markets responded…

All three major indexes opened in the red. And the sharp dive is just continuing as the day goes on.

But while the trade war has been investors’ main focus as of late, it’s not the only thing to pay attention to…

When looking at market moves, you can’t use tunnel vision. There’s more going on than meets the eye.

In fact, as the broader market drops, these three industries are climbing…

How Hurricane Dorian Is Moving the Market

When you look at the headlines plastering the financial news networks post Labor Day, you’re seeing more than just the U.S.-China trade war.

The manufacturing index for August also came in this morning, and, well, it wasn’t great. At 49.1, the Institute of Supply Management posted its lowest level since January 2016. For the first time in three years, the U.S. manufacturing sector shrank.

On top of that, we have Brexit looming closer and closer, its weight on global markets growing heavier every day that goes by without a deal.

And then there’s Hurricane Dorian.

As the terrible storm moves through the Bahamas, my thoughts and prayers go out to all Bahamian citizens. This powerful category five hurricane is a monster, cutting a swath of destruction through the Bahamas and bearing down on the U.S. coastline as I write this. It is projected to move north, avoiding a direct hit on the U.S. I am hopeful that this will happen.

Hurricanes are a part of life in Florida and the Gulf states, where most hurricanes make landfall. In fact, hurricanes touch down in the U.S. an average of 1.7 times per year. One-third of those are major hurricanes. They can bring down a ton of destruction and loss of lives. The average hurricane inflicts $21.5 billion in property damage. (Sourced from JP Morgan.)

So, on average, $36.6 billion moves into U.S. companies each year during hurricane season – May through November. As a result, hurricanes also impact stock prices, and we’re seeing that in the market amidst the overall dive – specifically in the following three industries…

  • Building companies

Building company stocks are an obvious grower. Buildings must be repaired or even rebuilt after a hurricane, and during the week before and four weeks after a hurricane, building supply companies like Home Depot Inc. (NYSE: HD) usually rise.

Historically, the best performer in this space is Masco Corporation (NYSE: MAS), manufacturer and distributor of building and home improvement products. It has outperformed the S&P 500 by 9.6% after a hurricane has made landfall.

  • Auto companies

Cars damaged during a hurricane often need to be replaced as well. Carmax Inc. (NYSE: KMX) is the largest used car dealer in the U.S. and outperforms the S&P 500 by 12% around a hurricane.

  • Oil Companies

Oil companies tend to outperform the S&P 500 the week before and four weeks after a major hurricane as well.

If you’ve ever been in a multi-hour gas line in Florida as a hurricane approaches, you know part of the reason for the rise in oil stocks… higher demand. Additionally, hurricanes, particularly those in the Gulf of Mexico, can disrupt supply. Hess Corp. (NYSE: HES) outperforms the S&P 500 to the tune of 14.7% around a hurricane. Marathon Oil Corp. (NYSE: MRO) outperforms the S&P 500 by 14.2%.

We know that the market is always moving. But it’s not just earnings reports and tariff reports that we need to pay attention to…

When it comes to the market, you can’t look at it through a telescope. There’s more than meets the eye – and we’re seeing that now with Hurricane Dorian.

Stay safe, everyone.

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Tom Gentile

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