It was smooth sailing for stock market investors in October. The S&P 500 soared about 11% on the month to tally its best performance since December 1991. The markets even pushed back into the green year-to-date after bouncing back from the summer lows.
Traders should have known such a move was too good to last. On Monday and Tuesday, we saw big downward moves in the market, with the major indices off about 5% to start the week. Fears have grown that the recent euro zone debt “solution” is nothing more than talk, Greece threw the EU a curveball Tuesday, and the drumbeat of disappointing headlines continues.
There’s job news (unemployment claims dipped a mere 2,000 last week to 402,000 — a drop in the bucket), spending news (Americans are saving less but spending more) and housing news (one group calculates home prices will be down almost 4% by next summer for a 35% decline since peak levels).
The latest log on the fire, however, isn’t a government boogeyman or some data wonk with a gloomy spreadsheet. No, this time it’s Mother Nature putting pressure on stocks.
As the economy becomes more efficient, winter weather becomes more of a problem than ever before. Here are a few reasons why:
Sorry, I Can’t Make It to the Office: The average one-way commute from home to work is more than 25 minutes for Americans, according to a Census Bureau community survey. When you can’t get to work, you can’t work — and that saps national productivity.
More Burden on Taxpayers and Governments: Government budgets don’t have much wiggle room amid all the focus on austerity at home and in Europe. The ugly weather in late December of 2010 caused New York City to spend its entire seasonal snow removal budget of $38.8 million on one storm — meaning the city and its residents had to spend more than they expected to offset the harsh weather. That could be the score again this year for New York and a host of other municipalities.
Lost Shopping Days Aren’t Easily Recovered: Retail analysts estimate that the lost business because of winter weather isn’t wholly reallocated on a different day. Shoppers simply wind up spending less overall thanks to lost days, even if they still buy for everyone on their original list. That was the score last year, where it took a full two weeks of deep discounts and sales to offset lost sales during just a few days of the peak shopping season.
Of course, we could dodge a bullet and avoid any blizzards during the most important shopping days like Black Friday, Christmas Eve or the day after Christmas when returners — er, shoppers — descend on malls en masse.
But considering the winter of 2011-12 in the storied Farmers’ Almanac includes a forecast of “clime and punishment,” with unusually cold and stormy weather, don’t hold your breath. It’s more likely the recent storm that knocked out power to more than 3 million Americans is just the beginning of a long, hard winter.
There is enough bleak news facing the market right now, and investors certainly don’t need Mother Nature to pile on.
But judging by the forecasts, pile on she will — with plenty of snow to come in the weeks ahead.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.