The New Stock Market Forecast Strategy: Counting Trump’s Tweets

donald trump tweets impact on stock market
Trying to time the stock market? New research suggests you need to start paying even more attention to President Trump's Twitter feed. | Source: Shutterstock

There’s no doubt that President Donald Trump loves watching the stock market go up.

After all, he has bragged at least 60 times about how the Dow Jones Industrial Average has performed since the 2016 election, and his tweets have the potential to make or break a stock.

However, according to new research from Bank of America Merrill Lynch, the stock market hates when Trump tweets.

Trump’s tweetstorms are hurting the stock market

The investment bank analyzed the S&P 500’s daily movements on days when Trump was relatively quiet (publishing five or fewer tweets) compared to days when he was exceptionally prolific (unleashing more than 35 tweets).

The analysis found a massive gap in the S&P 500’s daily performance based on those metrics. When Trump types too much, the stock market bellwether index tends to fall to the tune of 9 basis points. On saner days when he is more engaged in his presidential duties, the index climbs an average of 5 basis points.

That’s a 0.14% swing.

chart from Bank of America Merrill Lynch
When Trump tweets more, the stock market goes the wrong way. | Source: Bank of America Merrill Lynch via MarketWatch

Of course, correlation does not equal causation, but Trump’s Twitter habits might be another variable that investors should monitor more closely.

The problem is that there’s no way to predict to what extent Donald Trump is going to use Twitter on a particular day.

But a closer look at recent trends suggests that he has been getting more active.

Trump’s Twitter usage increased along with the S&P 500’s volatility

President Trump’s activity on Twitter has picked up the pace in recent days, according to data from Trackalytics.

Chart showing Trump's tweet frequency and S&P 500 closing levels.
Trump’s Twitter activity has increased as the stock market has grown more volatile. | Source: Trackalytics/Chart by author

From the chart above, it can be clearly deduced that Trump’s tweeting stepped on the gas toward the end of June.

He started sending upwards of 30 tweets on a more frequent basis every week, and by the end of July, the S&P 500 had started going south.

So the next time you want to time the stock market, don’t forget to check your Trump tweet counter.

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Harsh Chauhan

Harsh Chauhan

Markets contributor for CCN since 2019 from India. Written for other reputed publications such as The Motley Fool, TheStreet, and Seeking Alpha, and regularly featured on Yahoo! Finance. You can Follow Me on Twitter | Email me | Connect on LinkedIn | Muckrack

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