Trump tweets increasingly moving markets

Trump's tweets have been impacting volatility according to JPMorgan

US President Donald Trump speaks to reporters at the White House before departing to Fayetteville, North Carolina in Washington, US September 9, 2019. For several months now, Trump has publicly voiced his disapproval towards US Fed's policies and the stubbornness of Powell - a Trump nominee himself - to cut rates that would have been seen as a move to just please the President.

"Market-moving tweets exhibit distinct statistical properties, primarily addressing trade and, more recently, monetary policy".

JP Morgan's newly built "Volfefe" index - a nod to "covfefe", the mysterious word coined by Trump in an unfinished 2017 tweet - analyzes a rolling sample of recent tweets to judge how much effect the president's remarks have had on volatility. They find that the number of market-moving Trump tweets has been increasing in recent weeks, with certain words more likely to produce an impact than others.

The company's report said some 146 tweets out of 4,000 authentic messages during market hours from 2018 to the present had an impact on markets.

"This makes rough sense as much of the president's tweets have been focused on the Federal Reserve, and as trade tensions are broadly seen as, first and foremost, impactful on near-term economic performance and, likewise, the Fed's reaction to such developments", JPMorgan wrote in a report.

"A broad swath of assets from single-name stocks to macro products have found their price dynamics increasingly beholden to a handful of tweets from the commander in chief".


The "Volfefe Index" name was inspired by one of Trump's previous tweets which appeared to be about "constant negative press coverage" but had the latter world misspelled as "covfefe" instead.

In early-August, Wall Street plunged (one of the many occasions it did so recently) when Mr Trump chose to ramp up his trade dispute with China.

He announced, over Twitter, that the U.S. would impose a 10 per cent tariff on $US300 billion worth of Chinese imports. Prices for everything from Treasurys to stocks to gold screeched into a U-turn immediately following the announcement.

However, S&P 500 rose more than 35% since then, trump won the election in 2016, concludes the Agency.

The yield on the 10-year Treasury sank as low as 1.42% last week, its lowest level since before Mr. Trump's 2016 election jolted yields and stock prices higher.

Analysts have defined "market-moving" tweets as those that are followed by half a basis point change in United States government bond yields within five minutes of the tweet's publication. Treasury yields fall when investors are anxious about a weak economy and inflation, and the yield on the 10-year Treasury has dropped to 1.61% from 1.94% moments before the August 1 tweet.



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