It’s hurricane season again, and there are a few tropical storms already brewing. So let’s talk about how hurricanes can affect your stock, commodity, and currency portfolios.

Many times when we think of hurricanes, we just think of the supplies to obtain and where to retreat to when one comes. If we don’t live in a hurricane area, then we think of our loved ones who do and check in on them.

However, many investors on Main Street usually don’t think about how hurricanes can affect the financial markets.

In fact, every hurricane season oil traders get very nervous because it can affect the actual oil commodity and oil stocks quite a bit. However, the commodity itself is what is most affected.

For instance, if a tropical storm starts brewing, they get on alert. Anyone who is short oil typically closes out those contracts. So you can get a quick bump up in the price of oil just on that thought alone. Then if the storm gets upgraded to an actual hurricane, oil jumps all over the place as traders place their bets on where it’s going.

If a hurricane heads up the east coast and avoids the bulk of the oil rigs in the Gulf of Mexico, then oil prices typically sell off a bit. However, if the hurricane heads into the Gulf, then oil typically gets bid up ahead of time for the fear that either oil rigs will be hit and taken offline or that the rigs will have to be evacuated and shut down. Therefore production comes off line.

So it’s when these rigs are hit that oil can spike quite heavily.

In commodities, this affects the oil trader directly. In the near term, it can affect the stock holder of oil companies, too. In the short run, the oil stock investor, like ExxonMobil, can have to deal with some sizable gyrations. But in the end, it rarely affects the long-term growth projections of the company and, therefore, in the long run has no material impact to the stock.

Then there’s the currency investor. The Canadian dollar is really your oil currency

out there.

The United States gets some of its oil from the rigs in the Gulf, but the bulk of what we need comes out of Canada. Contrary to popular belief, we don’t get most of our oil from Saudi Arabia or any other country in the Middle East. While some comes from there, it doesn’t account for the bulk of our oil.

So if the rigs in the Gulf of Mexico get hit, it not only spikes up the price of oil which helps the Canadian dollar, but it makes it to where we’ll need to do even more business

with Canada with our rigs being offline.

That added extra business helps Canada even more and therefore the Canadian dollar.

You will particularly see USD/CAD and CAD/JPY affected the most out of any CAD pairs. Oil seems to affect these two the most.

When oil jumps, many times the dollar slumps since oil is priced in dollars.

It affects CAD/JPY a lot because Japan has to import over 95 percent of its oil no matter what the price is. If the price spikes high, it hurts Japan and its yen.

Therefore in a hurricane, USD/CAD is more likely to go down and CAD/JPY will have a bias to head higher.

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