MacroEdge 10/9 Midweek Report: Hurricane Impacts, Coal, Air Travel Slowdown, Election Boon, & Vision Update'
In this Midweek Report - Don and Six dive into economic and market data as it pertains to hurricanes, discuss coal, the air travel slowdown, and a new Vision update. #MacroEdge
Mid-Week Oct 9, 2024 (@DonMiami3, MacroEdge Chief Economist)
Good Wednesday evening MacroEdge Readers and Community,
Tonight we have a brief but interesting data dive into hurricane impacts on the employment and financial markets - focusing particularly on Claims and the Nasdaq - for the eight most costly hurricanes since 2000 to impact the United States. We’ve partnered this week with Vue Intelligence (@VueIntelligence) on X to deliver a real estate damage impact report on Florida following the impact of Milton, which made landfall tonight in Siesta Key. Hopefully - if you’re in the affected area - you are staying safe and I and the entire MacroEdge Team send our well wishes.
This week we’ve seen yields continue to rise after the September jobs report has most convinced on a 1995-style ‘no landing’ style scenario, but markets continue to evolve largely as we expected following the 50 basis point cut, with about a 5% move thus far realized on the NDX. The cycle of hard versus no landings dating back to the early 90s directionally are usually decided (or priced in) 2-4 months after the initial cut. The Fed likely downsizes its second rate cut for November to 25 basis points, although there could be evolving data over the next month until past the election that lead them to change their opinion. In New Zealand - the RBNZ dropped rates for their second cut by 50 basis points - and in Canada it’s likely they also drop by 50 at the upcoming BoC meeting - given their much deeper labor and mortgage market issues than here in the United States. Until we get past the election now - this holding pattern of waiting for more data will be the story in the United States - and we’re looking for both signs of inflation (or the opposite) and labor market weakening signals for better direction on the economy for the remainder of the year.
Below we’ll discuss the impact of hurricanes, some data on coal (a potential inflation proxy), and data on slowing air travel for this latest edition of the Midweek Report. As we posted last night - we’ll be rolling out new Real Estate Reports on a once-a-month basis starting 10/31 - focusing on SFH/CRE/& more through RESights, which we’ll have more on throughout the month. Six will also discuss a midweek update for MacroEdge Vision below.
Let’s dive right in.
Hurricane Employment Impacts
As it pertains to large and destructive hurricanes - there can sometimes be an employment element after the fact. Notably with Hurricane Katrina, Harvey, Sandy, Ida, and Ian - there were pronounced increases in Initial Claims following the storm impact (as seen below in the visuals).
The largest impact is 1/2 weeks after the storm impact:
Hurricanes can also have much broader macro implications - from construction and recovery spend - to displaced workers and outmigration from states. All of these will be something to keep an eye on after both Helene and Milton are likely to see their damage total >$100 billion, making them some of the most expensive storms in US history.
Hurricane Market Impacts
Hurricanes have little to no direct impact on financial markets - using our sample of the 8 most destructive storms since 2000. In 6 out of 8 instances - the market ended higher 8 weeks after the hurricane impact. Here’s the Nasdaq view of the 8 most destructive storms:
Storms can take place at different times in broader macro cycles, and can also be drivers of elements of downturn as evidenced by the timing of past major hurricane events that have impacted real estate and employment markets.
A Look at Coal for Winter
Energy prices are something to keep an eye on with a global easing cycle getting underway (the largest in scale since 2007-2008 and COVID), and a colder-than-expected winter could send prices higher, particularly, coal prices:
Airline Travel Demand Starting to Wane
Many took interest in the latest TSA travel data I shared yesterday - but air travel appears to be cooling from last year’s numbers and resetting towards the 2019 numbers.
Some hurricane impact was seen in the data from yesterday when several large airports in Western Florida closed (a near 9% drop y/y from 2023 #s
This aligns with airlines cutting routes and costs (Southwest, Spirit) and if travel demand comes in much softer than expected during the holiday season that would be a pretty clear indication that Americans (and potentially corporate travelers) have begun to pull back on their 2021-2024 revenge travel mania… We’ll keep an eye on this indicator through the Thanksgiving season and there are opportunities to capitalize on with airlines…
With the election now being front and center for markets, Americans, and the media - this may provide a further boon to the market action we’ve seen since the 50bp rate cut - but negative inflation (or employment) data would send things the wrong way again (like the July-August spook).
With all of that being said - as I stated at the beginning - stay safe and well to the Floridians and I’ll let Six take it away.
MacroEdge Vision Update October 9, 2024 (@SixFinance, MacroEdge Head of Research)
Tonight we hold our Florida family near to our hearts. At MacroEdge, we have a large family from Florida that we hold near and dear. First and foremost, we wish them the most favorable circumstances and the most positive outcomes.
In our corner of the world, the world continues to spin.
We will continue to make adjustments as we see appropriate. Presently, we see long coal stocks and short airlines as the most appropriate additions to our positioning.
