Forget the Summer of 69’, it was the Summer 0f 2018 that got us hot under the collar this year – quite literally!
We reached the Semis in the Russian World Cup, saw a Royal Wedding that actually reflected society as we know it and then, to really add the cherry, we saw the hottest July on record!
Sounds good right? But how does that tidy culmination affect investing? And does a heat wave of this length help or hinder the economy? Sit back, grab and ice cream and let’s delve a bit deeper.
When thinking about investing at any time that isn’t quite ‘normal’, it’s vitally important to think first and foremost about how the change effects our behaviour. Behaviour patterns and change in particular can both empty and line the pockets of the companies we hold so dear.
So let’s take a look at the summer and how the heat affected the Markets.
Pros:
The Sun is shining and we’re absolutely buzzing about it! And guess what? When we’re happy – we tend to spend more. The million pound question however is this – what is it we spend more on?
According to John Lewis – Barbecue meat and ice cream. Who’da thought it?! Sales of meat for the barbecue were up a tidy 40% during the heat wave compared to last year, and ice creams? They were up a mouth-watering 130% – not too frosty! (Financial Times, July 2018).
It’s not just us that feels the heat when the Sun comes out – our furry friends do too. At the peak of the heat wave, Pets at Home were doing a roaring trade, having their best day of sales ever this August. As people flocked to stores in search of cooling vests and pet friendly paddling pools, revenue surged by a sizzling 18% (The Telegraph, 2018).
Last but by no means least – Pubs. Now this was somewhat a joint effort between the non-stop sunshine and the team of 11 that got us all the way to the semi-finals. It’s a no-brainer that when the sun’s out – the beer gardens are overflowing. Add the World Cup to the equation – and a good one at that – and you’ve got some seriously nice numbers. During the Croatia match – which we can just about now think about – an extra 10 million pints of beers were drunk than on the same day in other years. For the economy that’s a £30 million influx – cheers! (Metro, 2018).
Cons:
The economy as a whole can suffer a little when life gets a bit more action packed than usual. When the Sun is out and we’re all waiting for the clock to tick to an appropriate time to hit the beer gardens – unsurprisingly productivity levels can somewhat suffer. Now this is harder to measure than sales, however remember – time is money. Those early darts and leisurely lunches do come at a cost – and not just the beer.
Whilst we may be racking up huge bills on ice creams and burgers for the BBQ – when the Sun has his hat on the one thing we don’t seem to fancy is traipsing around big department stores – air conned or not. John Lewis reported a 6.3% drop in Home Furnishing sales in comparison to last year (Financial Times, July 2018).
Retail sales in general suffered during the heat wave, because although we’re out in our masses buying sun cream and ice lollies – as a nation when the Sun finally greets us we want the beach! Not a shopping centre. The ONS reported a bigger fall in June retail sales than expected. However, retail sales in general for quarter 2 saw a rise of 2.1% (The Telegraph, July 2018). Guess we must really love our ice creams!
It’s not just retail that suffers – farming can take a huge hit when the weather is as glorious as it has been as parched crops and fields of yellow cry out for a good shower. The impact of this is yet to be seen – but it will be of no surprise that we may have a bit of a shortage on our hands. For farmers – this means less crop available to sell. For consumers – this means the price of the goods we do have rises. Not exactly win win.
A sunny summary
Overall, the economy as a whole did pretty well out of the heat wave, with a boost of £1 billion per day. (Institute of Economic Affairs, August 2018).
For the Markets, it’s a rather ambiguous time. There are winners, and there are losers. For the winners, the heat wave came as a very welcome break from the much cooler start to the year, when the ‘Beast form the East’ froze spenders in their tracks.
If the new Summer temperatures are set to stay as predicted – some valuable lessons are there to be learnt – in particular when it could be an idea to hold onto Stocks that are looking a bit jaded. The Pets at Home share price was at an all-time low when the heat wave struck – leaving a few very happy bunnies we’re sure.
Keep track of the Markets with dabbl – and see for yourself how even a change in the weather can make a real impact.
