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Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
EL NIÑO IS COMING SOON. The list of items that have the potential to slow economic growth in the U.S. and/or the world is longer than anyone would like it to be. Now, there’s a new item on the list: El Niño.
El Niño is a change in the normal wind and wave patterns of the Pacific Ocean that occurs every few years. The change can significantly alter weather across the nation, according to the National Oceanic and Atmospheric Administration. It also can have a significant influence on economic growth, according to new research published in the journal Science.
Dartmouth scientists Christopher Callahan and Justin Mankin wanted to investigate how climate variability affects economic growth. They decided to quantify the impact previous El Niños have had on the world’s gross domestic product (GDP), which is the value of all goods and services produced. Eric Roston of Bloomberg reported:
“The new analysis uses a model that combines economic growth and climate variability from 1960 to 2019 and compares GDP growth around the world before and after El Niño events. The output suggests a ‘persistent’ impact on countries’ economic growth, especially in Peru, where the dynamic was first discovered, and around the tropics. They found that a powerful episode in 1997 and 1998 set world GDP back $5.7 trillion and a 1982/1983 El Niño reduced growth by $4.1 trillion.”
Scientists at the U.S. Climate Prediction Center say there is a 90 percent chance that an El Niño weather pattern will occur later this year. It remains to be seen whether or how El Niño will alter economic growth.
As an investor, it can be difficult to think of economic slowdowns and recessions as normal parts of the economic cycle, especially when financial markets head lower. If you’re concerned about the future, please let us know. One of our most important roles is helping clients maintain a long-term perspective.
Weekly Focus – Think About It
“You'll never find a rainbow if you're looking down.”
—Charlie Chaplin, comic actor
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