Big “El Niño” Is Looming – Record Heat & Rain Likely

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
June 6, 2023

Big “El Niño” Is Looming – Record Heat & Rain Likely

IN THIS ISSUE:

1. The Highest Inflation In 42 Years

2. A Big “El Niño” Event Is Looming

3. How & When Does El Niño Happen?

4. El Niño Can Affect Weather Worldwide

5. Conclusions – Action To Take

The Economy: Highest Inflation In 42 Years

We start today with some brief economic commentary. Things are pretty quiet right now with all eyes focused on what the Fed is going to do next week at its June policy meeting. With things on the economic front relatively quiet, I’ll shift our focus today from the markets and investing to the long-term weather outlook and a possible record “El Niño” this year.

But first, when the history books are written for 2022 and 2023, they will be highlighted by the fact that US consumer prices soared to the highest levels in more than 40 years – an inflation tsunami not seen since the late 1970s.

It remains to be seen who or what will get the blame for the spike in inflation last year, but I’ll bet President Biden and the Democrats will be cited as the main culprits. The president and his advisors bet on the theory that the current wave of inflation was only going to be “transitory” and pushed forward with their big spending plans. Boy, were they wrong!

The question on everyone’s mind now is whether or not the Fed will opt to raise its key lending rate another 0.25% at its June 13-14 policy meeting next week, marking the eleventh consecutive rate hike in this cycle.

Since its last rate hike on May 3 to 5.00%-5.25%, there has been steadily increasing pressure on the Fed to forego another increase on June 14. As a result, there is a broad consensus that the Fed will vote to hold rates steady at its meeting next week.

I am not at all convinced. The Consumer Price Index rose at an annual rate of 4.9% in April (latest data available). While that’s down considerably from the peak at 9.1% last year, it is still far above the Fed’s target inflation rate of 2%.

It is impossible to predict how the Fed Open Market Committee (FOMC) will vote next week. There are 12 members of the FOMC including so-called “hawks” and “doves,” so the vote could swing either way. We’ll just have to wait and see.

Switching gears to our main topic, I have decided to go a little different direction today from our usual focus on the economy, the markets and investing in general. Today, I want to focus on the upcoming weather outlook and the odds for a record “El Niño” this year. I think you’ll find it interesting.

A Big “El Niño” Is Looming With Serious Implications

Climate scientists and meteorologists are predicting a record El Niño this year. El Niño and La Niña are climate patterns in the Pacific Ocean which can significantly affect weather worldwide. El Niño season is typically from October through March but often lasts considerably longer, occasionally running into the following year.

El Niño is the warm phase of the Pacific Ocean’s temperature cycle, and this year’s El Niño is poised to be a big one, sending shock waves into weather patterns around the world. It’s likely to set new heat records, energize rainfall in South America and elsewhere, fuel drought in Africa and disrupt the global economy. It may already have helped fuel early-season heat waves in Asia this year.

“A warming El Niño is expected to develop in the coming months, and this will combine with human-induced climate change to push global temperatures into uncharted territory,” said Petteri Taalas, Secretary-General of the World Meteorological Organization, in a statement earlier this year. “This will have far-reaching repercussions for health, food security, water management and the environment. We need to be prepared.”

On another front, we know the next El Niño won’t be cheap. The one in 1997-98, among the most powerful in history, led to $5.7 trillion in income losses in countries around the world according to a study published earlier this year in the journal Science. It was also blamed for contributing to 23,000 deaths as storms and floods amped up in its wake.

Rising average temperatures are poised to amplify these effects further. Even if every country met its existing pledges to cut greenhouse gas emissions to limit climate change, El Niño events could lead to $84 trillion in economic losses by the end of the century, according to the Science study.

This might seem like a whole lot from a weather phenomenon driven by slightly warmer than average water in the Pacific. But it turns out that the planet’s largest ocean, covering about one-third of its surface, is a powerful engine for weather around the world. Seemingly small shifts in temperature, wind and current in the parts of the Pacific Ocean near the equator can alter weather patterns for months.

Scientists have improved their ability to predict when these cycles will rise and how severe they will be. At the same time, humans are also changing the climate by building more homes, offices, ports, etc. in areas that are vulnerable to disasters worsened by El Niño. That’s why such events can be so costly.

How & When Does El Niño Happen?

Fishermen off the coast of Ecuador and Peru coined the term El Niño in the 19th century to describe a warm water current that regularly built up along the west coast of South America around Christmas. El Niño means “the boy,” a reference to the Christ child.

The warm water turned out to be part of a much larger complicated system connecting seas and skies all over the world. Scientists now know that the Pacific Ocean cycles between warm, neutral and cool phases roughly every two to seven years, inducing changes in the ocean and in the atmosphere.

This back-and-forth is called the El Niño Southern Oscillation, or ENSO. It’s “the strongest fluctuation of the climate system on the planet,” said Michael McPhaden, a senior scientist at the National Oceanic and Atmospheric Administration (NOAA).

The key thing to understand is that the Pacific Ocean is huge. Huuuuge! The Pacific Ocean is the largest and deepest of Earth's five oceanic bodies. It extends from the Arctic Ocean in the north to the Southern Ocean in the south and is bounded by the continents of Asia and Oceania in the west and the Americas in the east.

And that’s just the surface area; the Pacific averages 13,000 feet in depth but can dip as low as 36,000 feet. Water isn’t just moving north, south, east, and west, but up and down. These currents are driven by wind as well as temperature and salt gradients.

During El Niño’s neutral phase, wind pushes warm water in the Pacific around the equator from east to west. This lets warm water pool near Indonesia and raises sea levels there by 1.5 feet (0.5 meters) above normal compared to the coast of South America. The warmer water near Asia evaporates more readily and fuels rainstorms there.

And as surface waters get pushed away from South America, water from deeper in the ocean rises, bringing with it valuable nutrients like phosphorus and nitrogen. This phenomenon is called “upwelling,” and it’s critical for nourishing sea life. About half the fish in the world are caught in upwelling zones.

When El Niño starts picking up, this engine shifts gears. The trade winds slow down and the warm water near Asia starts sloshing back eastward across the Pacific, reaching the coast of South America. The drift in warm water also moves evaporation and rain such that southeast Asia and Australia tend to get drier while Peru and Ecuador typically see more precipitation.

Graphic showing where el nino and la nina form

“It creates a lot of convection and a lot of thunderstorms in a part of the world that doesn’t always have that activity,” said Dillon Amaya, a research scientist at NOAA. “You release a lot of energy and a lot of heat into the atmosphere and this creates waves that propagate in the Northern Hemisphere and in the Southern Hemisphere symmetrically.”

El Niño Can Affect Weather Worldwide

These disruptions can then deflect weather patterns across the world. For instance, in the US, El Niño typically leads to less rainfall in the Pacific Northwest and more in the Southwest. But it’s one of several factors that influence the weather, making it tricky to anticipate just how it will play out in a given year. “It’s not always a one-to-one relationship,” Amaya said.

The guidelines for declaring an El Niño are sea surface temperatures in the equatorial Pacific that stay 0.9 degrees Fahrenheit (0.5 Celsius) above the 30-year average for three months.

Right now, with the seasons changing, it’s tricky to say for certain that the world is in an El Niño year, but researchers say it’s looking increasingly likely. They’ll have a better answer in the coming weeks.

This engine can also shift into reverse. Tradewinds blowing east to west across the Pacific get stronger, cooling the region around the equator, a phenomenon known as “La Niña.” This tends to have a cooling effect over the whole planet, just the opposite of El Niño.

El Niño typically picks up over the summer and shows its strongest effects over the winter in the Northern Hemisphere. Right now, forecasts drawing on ocean buoys, sensors, satellite measurements and computer models show that a strong one is brewing as the eastern Pacific Ocean steadily warms up just below its surface.

“The vast majority ... are assuming that we’re going to have a big El Niño this year. I think we’re definitely expecting to break global temperature records this year,” said Amaya.

Graphic showing areas of the U.S. affected by el nino

Part of what’s making this so jarring is that El Niño is coming out of an unusually long La Niña phase. They typically last one to two years, but the world has been in this one since 2020. “There’s only been three triple-dip La Niñas in the last 50 years: One in 1973 to 76, one from 1998 to 2001, and then this one,” said McPhaden.

That has allowed more heat energy to accumulate in the ocean and may have helped cushion some of the warming due to climate change. However, the World Meteorological Organization noted that the past eight years were still the hottest on record.

So, the warming water detected in the equatorial Pacific and the rebound from La Niña point toward a strong El Niño this year. “All the ingredients are in place and the soup is cooking,” McPhaden said. “The ocean is uncorked. All that heat that was stored below the surface of the ocean is going to come out.”

Conclusions – Action To Take

I wanted to veer from our usual topics today and bring you this update on El Niño because: 1) There is such a broad consensus among weather scientists and meteorologists that we will see a potentially significant El Niño event this year; and 2) A serious El Niño event this year could mean some significantly increased volatility in the financial markets, including the US stock and bond markets.

Admittedly, there’s not a lot we can do to protect ourselves from an El Niño event, but I thought you would want to know what the experts are predicting for later this year.

Very best regards,

Gary D. Halbert

SPECIAL ARTICLES

Inflation Falling But Still Well Above Fed’s Target

Big El Niño Event Virtually Guaranteed This Year

Gary's Between the Lines column:
Many Older Americans “Unretiring” Due To Inflation