Our hearts go out to our clients, friends and everyone impacted by the recent tragedies of hurricanes Harvey and Irma. We send our best wishes not only to those directly affected, but to the first responders and teams of others aiding in the clean-up efforts and the rebuilding efforts yet to come.

An unfortunate, yet real, circumstance of natural disasters such as hurricanes is the reaction of the equity markets. This topic is on the minds of our clients lately, and we would like to address it by looking at the story of a different sort of hurricane: Hurricane Carter.

Rubin “Hurricane” Carter was a middleweight boxer at the height of his boxing career in the 1960s when he knocked out champion boxer Emile Griffith twice in the first round and won by technical knockout. Three years later he was convicted of murder and sentenced to life in prison despite his firmly asserting his innocence. (For more details on the event itself, listen to the Dylan song "Hurricane," which tells the tragic story.)

Upon entering the jail on his first day, Griffith said to the warden, “I know you had nothing to do with the injustice that brought me to this jail, so I’m willing to stay here until I get out. But I will not, under any circumstances, be treated like a prisoner — because I am not and never will be powerless.” Not only did he refuse to eat prison food, wear the normal prison uniform or see visitors, he refused to show any anger at all. He focused on three things and three things only: (1) most importantly, becoming a better human being; (2) maintaining his innocence of the charges leveled against him; and (3) leaving the prison a free man as soon as possible.

After 19 years and two appeal trials, he did all three things.

And maybe the most amazing thing about Hurricane Carter was when he walked out of prison, he just went back and resumed his life as if nothing happened. He did not ask for an apology from the legal courts or sue for damages. In his words: "Doing so would mean that the world had taken something from me that I wanted back. I had never given up on myself and my innocence, so there was no question of apology or damages. This can’t harm me — I might not have wanted it to happen, but I decide how it will affect me. No one else has the right.”

The recent toil and damage from hurricanes Harvey and Irma are massive obstacles that ultimately the great citizens of Texas and Florida will overcome and overcome triumphantly, as Americans always do in times of duress. These will be become opportunities for growth, economic or otherwise. And that is one of the reasons why equity markets, on average, fare pretty well after hurricane disasters.

In reviewing the impact of hurricanes in the U.S., Ned Davis Research found that the S&P 500 Index is up on average 1.1%, 2.9%, 5.3% and 11.0% after 21, 63, 126 and 252 days, respectively, after the event. Isolating the six costliest hurricanes in U.S. history, Ned Davis Research found the median equity market return to be slightly better:

Like Hurricane Carter digging in and improving himself in the midst of disaster, the people in the path and surrounding areas of the two disastrous storms will refocus, rebuild and remake their communities stronger than ever before. 

 

This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product.  The opinions expressed do not necessarily reflect those of author and are subject to change without notice.  Diversification cannot assure profit or guarantee against loss. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Sequoia Financial Advisors, LLC makes no representations or warranties with respect to the accuracy, reliability, or utility of information obtained from third-parties. Certain assumptions may have been made by these sources in compiling such information, and changes to assumptions may have material impact on the information presented in these materials.  Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment adviser does not imply a certain level of skill or training.