Donald Trump has tweeted 10,000 times since he was sworn in as president of the United States. And, according to JPMorgan Chase, his tweets are increasingly moving the stock market and bond markets.
Analysts at the Wall Street bank created the ‘Volfefe’ index which tracks the impact of each Trump tweet on the bond market. They found that Trump’s effect on market volatility was “significant.”
“The president’s remarks on this social media platform has played a statistically significant role in elevating implied volatility” – JP Morgan Chase analysts.
According to the bank’s analysis, Trump tweets an average of 10 times per day. And those tweets are increasingly focused on the economy and trade. They don’t get as many likes and retweets as his populist policies, but they hit the markets hard.
“The subject of these tweets has increasingly turned toward market-moving topics, most prominently trade and monetary policy. And we find strong evidence that tweets have increasingly moved the markets immediately after publication.”
The volfefe index was created by measuring the impact on Treasury yields in the five minutes after each Trump tweet. It unearths a strong correlation between the president’s tweets and volatility in the bond market.
In particular, JPMorgan Chase discovered a few words and phrases that move the markets more than any other. The most powerful trigger words are:
The first three words are almost certainly linked to the US-China trade war where Trump routinely threatens “billions” of dollars worth of tariffs on Chinese “products.” The tweet below from from August 23rd contains all three trigger words.
Consequently, the S&P 500 fell immediately.
Further analysis from Bank of America Merrill Lynch discovered that Trump’s Twitter activity increasingly has a negative effect on the stock market.
On days when Trump tweeted more than 35 times, the S&P 500 falls an average of 9 basis points. When he tweets fewer than 5 times, the stock market climbs an average 5 basis points.
We’ve seen this play out in real time on Wall Street. UBS warned investors to downsize their position in stocks due to increased trade war fears. While Goldman Sachs warned of a looming recession over trade war concerns.
As Trump increasingly focuses his tweets on trade war issues and monetary policy, Wall Street investors are growing nervous.