The Market Preps for a Stronger El Niño

By: Anneken Tappe · November 15, 2023 · Reading Time: 2 minutes

Clouds on the Horizon

The El Niño climate pattern could disrupt power grids, crops, and global supply chains this winter. Investors are trying to get prepared for the potentially extreme weather.

Company mentions of weather and El Niño — which was identified over the summer, and is the first in four years — have increased on this year’s earnings calls already.

El Niño Economics

El Niño is a climate phenomenon in which surface water temperatures in the Pacific rise, kicking off a chain reaction that can lead to events like heavy rainfall or droughts, which in turn have knock-on economic effects. It occurs every two to seven years.

This year’s pattern already caused a drought that caused the Panama Canal Authority to limit the number of ships that pass through, restricting global commerce.

Who Should Take Cover?

El Niño brings uncertainty to industries that rely on consistent weather patterns. Think grocery stores, energy providers, and companies based around single crops like coffee chains or chocolatiers. Another worry is that during a time that all eyes are on inflation numbers, climate effects could keep prices elevated.

On the other end of the spectrum, some crops may benefit from increased rainfall, so long as it doesn’t lead to floods, or higher winds in the case of renewable energy through wind turbines.

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