As the nation's money managers return from their summer respites, they're finding that Hurricane Katrina has left a host of questions marks within their portfolios.
This is a traditionally the week when investment professionals tweak their portfolios for the industry's final quarter, the Wall Street Journal reported yesterday, but this year they might have to rethink their strategies. Before Katrina rocked the Gulf Coast, the industry knew what might impact equities: the Federal Reserve's monetary policy, volatile energy prices and sure-footed corporate earnings. Now, however, they're trying to figure out if Katrina's impact on distribution channels might pinch corporate profits, force oil prices even higher and ultimately hamstring the stock market.
The industry's contrarians, meanwhile, are banking that rebuilding effort in the South will boost the markets in the long run. Consumption will surely rise, as will investment in new equipment, and the Fed will likely suspend any further short-term interest hikes, they think.
"This is changing a lot of the thought patterns that I had 30 days ago," said William Dwyer, president of Baltimore-based MTB Advisors, which boast more than $11.5 billion in assets under management. Dwyer told the Journal that after this initial jolt to the economy, Katrina's rebuilding effort could actually extend the bull market and add as much as $50 billion to the economy over the next six months.
Others aren't so sure.
"The negative consequences resulting from Katrina, whether they are economic or political, may hang around a bit longer and cut a bit deeper than is now anticipated," said Gordon Fowler, chief investment officer at Philadelphia-based Glenmede Trust. In a research note to clients, Fowler advised them to put stock buys on hold, an about-face from his recommendation last month to increase stock holdings.
For the record, the Dow Jones Industrial Average actually ended a two-week slide as cleanup efforts got under way last week. The Nasdaq Composite Index also posted gains and oil and gasoline futures fell on news that deliveries were picking up and that national oil reserves had been tapped.
Henry Herrmann, chief executive at the Overland, Kan.-based fund complex Waddell & Reed, called Katrina's impact unique from other storms and thinks the energy-price problem will persist. Individual stock groups might move sharply, he offered, but the broader market will make little progress.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.