Co-authored by Troy Tanzy
The East Coast and many other parts of the U.S. are bracing for severe winter weather conditions to sweep the country this week. In what is nicknamed a “bomb cyclone,” an area of rapidly declining low pressure is expected to wreak havoc on New England with 6 to 12 inches of snow and 40–60 mph gusts, according to CNN.
U.S. officials say at least 11 people have died due to cold-related deaths this week, in states ranging from North Dakota to Texas. Places as far southeast as Tallahassee and Pensacola, Florida, are already experiencing snow and frigid conditions, grounding flights and causing states to open emergency shelters. Such weather events could cost airlines and other industries billions of dollars, as airlines are forced to pay additional costs while forfeiting revenues due to grounded or canceled flights. Reductions in business and leisure travel may result in lower economic spending, which could impact markets negatively. Airline companies may experience reductions in their first-quarter earnings due to adverse weather conditions, as witnessed in the first quarter of 2014.
Companies that benefit in the short term due to severe winter weather conditions are those that sell emergency supplies and generators, as consumers prepare for the storms. Even if the weather is not as severe as forecast, companies benefit from increases in sales due to expectations. The demand for heating oil is expected to increase as well.
The market is not expected to feel a major impact due to the severe winter weather this week. Cold weather drives consumer demand for particular products and services, but the overall effect of this storm is not expected to be significant.
Sectors: Among Sector Benchmark ETFs, the average momentum score increased slightly from 18.18 to 18.36. Consumer Staples significantly decreased in ranking over the week, down by 4. Cyclical sectors slightly decreased, and defensive sectors increased. Sensitive sectors actually decreased for the week, down 6. Materials and Real Estate led the move upward, both up by 5 over the week. There doesn’t appear to be much organization in this week’s rankings, so risk appetite remains ambiguous.
Factors: For Factor Benchmark ETFs, the average momentum score fell slightly from 23.82 and 22.73. Dividend Growth and Growth stayed the same, and none of the factors increased. Momentum and Low Volatility fell by 1 point, while Growth stayed the same. Aggressive and defensive factors all fell slightly for the week. Overall, most factors decreased—only two of them remained the same. However, all factors are positive.
Global: Global Benchmark ETF momentum scores provided continued optimism for the week. The average score increased from 15.55 to 21.91, with emerging countries leading the way. Latin America and Emerging Markets exploded, increasing by 18 and 13 points, respectively. Overall, developed markets had mixed results over the week, while emerging countries gained.
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