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Ida Aftermath Puts These ETF Areas in Focus

·3 min read

The effect of the highly talked-about Hurricane Ida was weaker than feared in Mississippi as its top wind slowed but the level of destruction should not be ignored. Destructive winds and water already had a disastrous impact along the southeast coast of Louisiana.

Ida hit land on the same day 16 years earlier that Hurricane Katrina devastated Louisiana and Mississippi, and its 150 mph winds tagged it as the fifth-strongest hurricane to ever hit the mainland, per the source. The cost of the storm varies from analyst to analyst. Hurricane Ida will likely affect the energy, chemical and shipping industries that have are key hubs along the Gulf Coast, per researchers and analysts.

That said, let’s discuss the key areas that call for attention right now for profits or losses.

Can Insurance Industry Survive the Storm?

With destruction Louisiana and Mississippi, insured losses could be sky high. The analysts estimated that losses for the insurance industry will be around $10 billion from Ida, way lower than the $90 billion-plus from Katrina.

Property and casualty insurance companies may be hit hard as these are likely to shell out handsomely on claims in such catastrophic storms. So, one can expect how heavy the impact on insurance companies would be this time around. iShares US Insurance ETF (IAK) will likely feel the brunt.

Already, shares of property and casualty homeowners’ insurance companies like Universal Insurance Holdings Inc. (UVE) and HCI Group Inc. (HCI) lost about 2.6% and 0.4% on Aug 30. Reinsurers XL Group Ltd (XL) and Everest Re Group Ltd. (RE) too retreated about 1.2% and 1.8%, respectively. However, if rates rise in the coming days, insurance companies may get some cushion.

Energy Sector Under Focus

Ida has thumped considerable oil production (nearly 91%) from the Gulf of Mexico and a substantial portion of the U.S. refining capacity. Lower demand from refineries put pressure on crude oil prices and ETFs like Oil Fund LP (USO). However, demand for finished product gasoline rose, benefiting United States Gasoline Fund (UGA). As crack spread rose, VanEck Vectors Oil Refiners ETF CRAK gained.

However, Ida may weigh on natural gas futures by cutting demand from power plants, and will likely hurt oil and refined products’ prices by obstructing shipments to the nation’s third-largest gasoline market.

Agriculture ETFs to Rule Ahead?

Soybean and Corn prices gained as Hurricane Ida made landfall. The stormy weather has disturbed grain exports in the U.S.’s busiest agricultural port, a problem that could increase further as the peak harvest season approaches.

“Hurricane Ida has done considerable damage in the area around New Orleans and Baton Rouge,” Commonwealth Bank of Australia strategist Tobin Gorey said in a note. “What specific damage has been to U.S. crop export facilities is unclear for now - as is the period of shipping delays”, as quoted on Bloomberg. Needless to say, against this backdrop, Teucrium Corn Fund CORN and Teucrium Soybean (SOYB) should be in focus.

Home Retailers & Infrastructure in Sweet Spot

Rebuilding of homes and structures are necessary after a hurricane aftermath. Home Depot Inc. (HD) and Lowe's Companies Inc. LOW are thus in a bright spot. ETFs like Consumer Discretionary Select Sector SPDR Fund XLY and Invesco Dynamic Building & Construction PKB should also benefit.

A Boon for Auto Sales Too?

Repurchase of cars will gain traction now on higher replacing demand for the damaged vehicles. First Trust NASDAQ Global Auto Index Fund CARZ can thus gain ahead.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lowes Companies, Inc. (LOW) : Free Stock Analysis Report
Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports
First Trust NASDAQ Global Auto ETF (CARZ): ETF Research Reports
Teucrium Corn ETF (CORN): ETF Research Reports
VanEck Vectors Oil Refiners ETF (CRAK): ETF Research Reports
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