Mackin Pulsifer Shares His Insights on Japan's CrisisMarch 2011
We are saddened by the loss of life and disruption to peoples’ lives that the earthquake and tsunami caused.
The Japanese are resilient and industrious and we have no doubt the recovery from the devastation will be fast. The true impact on the economy, as in any major disaster, will likely be mixed. For instance the damaged nuclear plant has triggered sharply higher LNG demand to fuel?replacement electricity production. Oil fell on expectations that the world’s third largest consumer of oil would have lower consumption in the short term. Japanese semi-conductor manufacturers' factories are especially constructed to withstand earthquakes and appear to have withstood the disaster well although their stocks reacted sharply at first. Materials and industrial stocks rose on expectations of higher demand due to rebuilding efforts. We expect that this disaster will have a similar impact as Katrina did on the US, initial shock and then the realization that reconstruction stimulates growth.
Although we have seen a sell off in insurance companies, especially reinsurance firms, our portfolios are well diversified and this impact has been small. Typically insurance firms raise premium rates in the aftermath of these events suggesting the sell off is temporary. We are not recommending any changes at this time but we continue to monitor the situation and its potential impact on portfolios.
ABOUT THE AUTHOR
Vice Chairman and
Chief Investment Officer
Mackin Pulsifer is Vice Chairman and Chief Investment Officer of Fiduciary Trust. He manages individual, foundation and trust portfolios and is lead manager of the Franklin Large Cap Equity Fund
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