Covfefe

By Guest Blogger Ryan Lewenza

I find it remarkable that one man and 280 characters can have such a huge impact on the global financial markets. Of course I’m talking about President Trump (who else do we talk about these days) and his Twitter account.

Whatever you may think about Trump he sure knows how to utilize the Twitter platform to get his message (and every single thought that jumps into his head) out to the world. According to JP Morgan analysis, Trump has tweeted over 10,000 times since his inauguration, which works out to 10 per day on average. His tweets range from policy and personnel updates (John Bolton’s recent firing being a good example of this) to attacks on the media and his enemies. And are sometimes random like his now infamous late-night tweet “Despite the constant negative press covfefe.” While late-night talk-show hosts were ribbing him pretty good for this one, it’s pretty clear that he was just tired and probably fell asleep halfway through his tweet.

Jokes aside, his tweets have the power to move markets and literally impact trillions of dollars of global wealth. Below is a 1 minute bar chart of the S&P 500 on August 1, 2019. On that day Trump sent out a number of tweets on the ongoing trade war with China where he informed the public that the US would be imposing a new round of tariffs of an additional 10% on US$300 billion worth of goods. The S&P 500 was up 1% in the morning, then reversed the gains pushing the S&P 500 down more than 1% on the day. Based on the S&P 500’s market capitalization of roughly US$24 trillion, this 2% daily swing equated to US$480 billion of lost wealth on the day. And this is just the S&P 500!

Trump’s tweets have the ability to impact trillions of dollars of equities, bonds, commodity and currency values, and to me, given how trigger happy he is, is a bit scary.

S&P 500 Reaction to a Trump Tariff Tweet

Source: Stockcharts.com, Turner Investments

The impact of Trump’s tweets have become so meaningful that some of the US banks have started to measure and track their impact on the markets. For example, JP Morgan analysts have created an index to quantify the effect of Trump’s tweets on US bond yields. Called the “Volfefe Index” after Trump’s covfefe tweet, it shows that his tweets are having a “measurable” impact on US interest rates.

Bank of America analysts also quantified the impact of Trump’s tweets on the equity markets. They found that when he’s tweeting frequently (days with more than 35 tweets) they see negative returns of 9 basis points, whereas days with few tweets (less than 5), they see positive returns of 5 basis points. I’m not exactly sure how they were able to quantify this but in the chart above it’s clear as day that his tweets can move the equity markets.

So now, in addition to worrying about negative interest rates, inverted yield curves, Brexit, US/China trade war, Iran, Hong Kong et al., we now have to worry about Trump’s Twitter rants. Great!

JP Morgan’s Volfefe Index

Source: JP Morgan

Given the rising importance of Twitter and the markets it now seems like a good time to plug our Twitter account at the handle @turnerinvests. Currently our followers are a fraction of Trump’s 64 million, but with your help we’ll be able to ramp up those numbers and, just maybe, we’ll be able to move markets like the big guy. So today take a second and follow us on Twitter and I promise no-late night tweets of covfefe!

Our Twitter Account – @turnerinvests

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

Source: Twitter, Turner Investments