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The National Oceanic and Atmospheric Administration issued a forecast on Thursday for above-normal hurricane activity in the Atlantic basin this year.
NOAA’s outlook for the 2024 Atlantic hurricane season, which spans from June 1 to November 30, predicts an 85% chance of an above-normal season, a 10% chance of a near-normal season, and a 5% chance of a below-normal season. NOAA is forecasting a range of 17 to 25 total named storms (winds of 39 mph or higher). Of those, 8 to 13 are forecast to become hurricanes (winds of 74 mph or higher), including 4 to 7 major hurricanes (category 3, 4, or 5; with winds of 111 mph or higher). Forecasters were noted to have a 70% probability in those ranges based on the historical track record.
The upcoming Atlantic hurricane season is expected to have above-normal activity due to a confluence of factors, including near-record warm ocean temperatures in the Atlantic Ocean, the development of La Nina conditions in the Pacific, reduced Atlantic trade winds, and less wind shear, all of which tend to favor tropical storm formation. Another factor is that the hurricane season also features the potential for an above-normal west African monsoon, which can produce African easterly waves that seed some of the strongest and longer-lived Atlantic storms.
The NOAA forecast is consistent with an earlier 2024 hurricane season preview from Colorado State University’s well-known forecast team, which called for an extremely active hurricane season as well.
As always, the potential for a strong hurricane season presents heightened risk for weather-related production outages in the U.S. oil and natural gas industry. Some insurance stocks have also seen sharp share price swings around major hurricanes that hit high-population, high property value regions in the U.S.
As for stock picking, the names that have seen share price gains in the past ahead of major hurricanes are Walmart (NYSE:WMT), Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), and Generac Holdings (GNRC). Trading data shows a positive correlation between buying those four stocks in June ahead of particularly active hurricane seasons in comparison to buying during hurricane seasons with lower activity. In many cases, the best return for traders was buying the build-up (media reports) and selling the actual news (hurricane landfall).
