Groundhog Day is a popular observance in the United States that is meant to predict the weather. Punxsutawney Phil appears on February 2 every year, and if he is frightened by his own shadow than it signals that people can expect 6 more weeks of winter. If Phil doesn’t see his shadow, spring is on the way. While the Groundhog Day tradition isn’t scientific, current day meteorology is a highly-quantitative field where accuracy is critical.
Meteorologists predict weather patterns that ultimately impact people, products and services across the globe. First and foremost, weather impacts the lives of individuals, but beyond that it also impacts the economy. Hurricanes can shut down oil refineries, floods can wipe out crops, and heat waves can stress power grids to the breaking point. While one of the oldest jokes in the book is that meteorologists are wrong 50% of the time, those results wouldn’t cut it in real life. DRW’s resident meteorologist, Jason, explains how the weather affects the work we do, and the vitality of accuracy.
I have to be on top of my game all of the time to be successful. In my role at DRW, I predict weather patterns around the world that will ultimately affect commodity prices. DRW’s trading spans a wide range of asset classes, instruments and strategies, in markets around the world, including energy, grains, and other agriculture commodities. My day-to-day work can range from capturing a major cold snap that causes natural gas demand to spike, to predicting when a drought in Argentina will cause a drop in corn or soybean yield.
While traditionally weather has mainly impacted the energy and agricultural commodities, I have also seen cases where major storms can impact manufacturing and construction equities, reinsurance markets and bond markets. Weather impacts broader macroeconomic forces and it is critical for me to understand and then communicate how that data is evolving every day.
I have always had a passion for weather and I knew I wanted to be a meteorologist back in the seventh grade. I started my career in television and radio, specializing in winter storm and hurricane forecasting. Today, I still find hurricanes to be the most interesting thing to predict because the stakes are so high and each storm is unique and different. There is a big challenge that comes with predicting these storms and communicating the relevant risks and hazards.
I was managing the weather department at a national news organization during Hurricane Katrina in 2005. I recognized the small, but sudden shift in the storm’s track over southern Florida and was one of the first to recognize what a catastrophic storm it would be. In the months of aftermath, I recognized the huge effect weather forecasts could help predict what will happen to the economy, in addition to being vital to saving lives. After that, I began my career in commodities.
Today, I spend most of my time at DRW building and analyzing models, and communicating how that data is evolving to the trading desks. The market is getting smarter, and computing power and machine learning are pushing weather forecasting into new frontiers, so I am also working to ensure that DRW invests in the right technologies to translate information into opportunity.
As far as winter goes, Punxsutawney Phil may have been spooked by his own shadow, but I still believe we will see an early spring. Before you celebrate, I also think we have a wild ride over the next few weeks before we get there.