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Weather Conditions Impacting the Financial Market

When it comes to what weather patterns affect the markets, the opinions are divided among Market Analysts. However, some have long debated the subject, thoroughly analysing the phenomenon, and finally reaching the conclusion that these events have the power to influence financial assets in a very obvious manner. 

In this article, we’ll get to talk about the main weather conditions that have a significant influence on the trend of several assets. We’ll also get to discuss which are these assets, and whether or not it’s in fact the investors’ mood influenced by these events, or the actual financial assets. Continue reading to find out which events are commonly linked to market fluctuations, and which assets they can impact.

Blizzards

While raising the value of snow-cleaning equipment, these winter storms have a negative impact, not only on agricultural assets but can lead to businesses being closed, a drop in employment, or even in aviation-related companies’ shares. One asset, in particular, that responds positively to this bad weather is Natural Gas, that could drastically increase simply because of the lower temperatures.

Frost

Different than the previously discussed phenomenon, frost mostly impacts agricultural assets, and as a good trader, you simply need to check the region hit by it, to discover which asset can be most affected. Between Oranges, grains, cotton, and coffee, you’ll discover you have a lot more to choose from than in the case of other weather conditions. 

Hurricanes 

This severe weather condition can take a toll on the financial markets by delaying, or in certain cases, even interrupting Oil transportation. Specifically, that going from Iran towards the US, or Asia. This phenomenon can cause an extreme increase in the price of Oil, given the understandable lack of the asset in the destination markets. 

But clearly, Oil isn’t the only asset impacted by Hurricanes. The transport, or storage, of grains, can also be obliterated by them. One larger scale Hurricane, known as a typhoon, even managed to cause a flood that sunk a gold mine back in 2018. 

Monsoons

These severely hot and wet, or dry weather events cause a lot of damage to coffee production, simply by ruining the cherries. The obvious outcome: a sudden increase in the price of Coffee Futures. The same can happen with the tea, grain or cocoa quotations over the course of various years. 

However, given their wet or dry weather, these weather conditions can sometimes be favourable for coffee production, as this asset enjoys plenty of water and close to no sunlight. It all depends on the coffee plant’s maturation stage as well. 

Very much different than other events, in some parts of the world, people pray in fact for this weather condition, as it favours rich harvests. What is even more interesting is that Indian people that do this, invest their money in Gold, once again impacting the quotation of yet another financial asset

Floods 

As you’d expect floods impact agricultural commodities and lead the real estate sector to register great losses in the flood-affected areas. These then have a great impact on the economy of the specific area.

Draught

Draughts, like floods, tend to mostly impact agricultural assets. If we look back at the Monsoon longing in India, it would be safe to assume however that this specific weather event can also impact the value of Gold, as farmers won’t be able to invest as much. The impact, however, will be very small, potentially hardly being noticed in the financial markets.

Too hot weather

Impacting the farming sector by creating a very prosperous environment for pests. It also encourages a high consumption of energy for ACs, favouring Gas and energy shares

Silver Lining

Whether we’re talking about too cold, hot, wet or dry weather, these specific conditions are more interesting because of the consequences that arise once they go away. Some can affect only the financial market by taking a great swing at employment, making it harder to attend job interviews. Based on their severity, they can be at times negative, while other times they can be positive for the financial markets. 

However, there seem to be more economists believing that the weather in fact impacts the mood of the investors, that tend to become more pessimistic when there’s bad weather, and more optimistic when the sun shines brighter. In fact, it seems that traders that are in a bad mood then tend to sell assets, thus pushing their prices to drop, while happy traders tend to buy, supporting the prices to go up. 

If you want to know more about Trading Psychology and how to best handle it, make sure you register for Michalis’ webinars and learn more about what emotional trading is and how you can make the best of it.

How about you? 

Have you noticed any change in your overall financial preferences based on the weather? Emotionally trading, or not, just make sure to stay informed and continue to check the pulse of the markets with eXcentral.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage

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