UNITED STATES, WASHINGTON (OBSERVATORY) — Trump’s tweets have so much impact on the dynamics of the markets that they came up with a special index.
Analysts at JPMorgan Chase & Co. created an index evaluating the impact of Donald Trump tweets on US interest rates, which they say is growing.
The Volfefe index, named after Trump’s tweet, which featured the cryptic word covfefe, suggests the president’s comments have a statistically significant effect on Treasury yields, Bloomberg notes.
The number of Trump-driven tweet markets has increased dramatically over the past month, with comments with words like “China,” “billion,” “products,” “democrats,” and “great.”
…unfair Trading Relationship. China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%…
— Donald J. Trump (@realDonaldTrump) August 23, 2019
“Trade and monetary policy are increasingly becoming the focus of attention of the executive branch, and all comments, from expressing random moods to seemingly formal expressions of political intentions, are instantly distributed around the world through this carefully studied social network,” wrote analysts led by Josh Younger and Mounier Salem. – As a result, the price dynamics of a wide range of assets, from individual stocks to macro products, are increasingly determined by a number of commander-in-chief tweets.”
According to JPMorgan’s analysis, from the beginning of 2016, Trump published an average of about 10 tweets per day, and after the inauguration in 2017, 10 thousand tweets were published. Trump’s Twitter activity reached a minimum of five tweets per day ahead of the official inauguration, but has increased significantly since the end of 2018, with the largest number of tweets over the past four years in recent months.
Earlier, Vesti.Ekonomika already wrote that during his tenure as US President Donald Trump has already become one of the main newsmakers for many market participants and experts. Almost every day, traders are forced to make decisions based on what the head of state writes on their Twitter. But not all traders read Twitter.
Many, by the way, are convinced that Trump is simply manipulating markets to please his speculative friends, and such an opinion has the right to life.
It is not surprising that the lion’s share of tweets is dedicated to China. What is most interesting, the Chinese market participants pay the least attention to them, writes Bloomberg.
While their counterparts in other countries are scooping up the consequences of Trump’s tweets, stock traders in China do not have easy access to them because Twitter is blocked in China.
They are not in a hurry to look for workarounds, for example, connecting via VPN, and they say that Trump’s tweets, which are often published at the end of the trading session, have less impact on China’s stock markets than before.
“It makes no sense to follow him too closely: he can say something today, and tomorrow the story will be completely different,” said Jinkuang Investment Management investment manager in Shanghai Zhang Hajdong, referring to Trump’s tweets. “It would be too volatile to trade on his tweets ”
Trump’s tweets are driving Chinese markets, but there are signs that their influence is weakening. Stocks in mainland China wavered on May 6, when two Trump tweets overshadowed the prospect of trade negotiations and collapsed stock markets around the world.
The Shanghai Composite Index then collapsed to a maximum of more than three years in 5.6%. At that time, Trump’s comment posts were removed from a Twitter-like Chinese platform. The Shanghai Composite Index volatility indicator that month jumped to a three-year high.
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