Trump Tweets and the Market

Trump Tweets and the Market. Twitter has revolutionized the way in which individuals in general and celebrities in particular interact with one another. It has become an indispensable communication tool for even politicians for addressing their constituents on matters of policy and governance. But Trump has taken Twitter’s ability to broadcast messages and turned it into an art form. He uses twitter frequently to address the public, individual companies, countries and make major announcements on U.S. policy and government actions. He has bypassed the traditional media in favor of Twitter and has reaped major political benefits for his “direct connect” with the people. But the frequent tweets by Trump have certainly made his Twitter feed an influential market moving force. He has berated companies and countries on Twitter and it has had an immediate effect on their stock prices. Billions of dollars in market value have evaporated in seconds after an unexpected Trump tweet hit the company.

Trump Tweets Impact On Financial Market Volatility

Trump’s tweets drive markets crazy. The tweets of Trump have an instant impact on the stock values, especially when Trump’s comments are negative.

On Dec. 2, 2016, Trump surprised investors with a Tweet saying, “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion.  Cancel order!”  The Tweet was posted approximately 40 minutes before the stock market opened, which gave investors plenty of time to place orders to sell the stock. Donald Trump’s words do not only cause a storm on social media, they also affect capital markets.

Boeing stock fell sharply after the market opened. He wiped off more than 1 Billion Dollars in Boeing’s market cap with that single tweet.

On Jan. 5, 2017, the President posted a new Tweet saying that “Toyota Motors said it will build a new plant in Baja, Mexico, to build Corolla cars for the U.S.  NO WAY! Build plant in U.S. or pay big border tax.”

The USD/MXN traded down 2% after such a post and record-low of 21.619 pesos to the dollar. The MXN dropped 3.5% against the USD, triggering intervention by Mexico’s Central Bank (Banxico).

March 2018 proved to be a challenging time for U.S./China trade relations, when new tariffs on steel and aluminum imports were imposed by Trump.

On March 2, 2018, Trump twitted over this concern, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore – we win big. It’s easy!”

Leading global indices saw major losses due to the tweet.

On Apr. 3, 2018, Trump tweeted about Amazon, “I am right about Amazon costing the United States Post Office massive amounts of money for being their Delivery Boy. Amazon should pay these costs (plus) and not have them bourne by the American Taxpayer. Many billions of dollars. P.O. leaders don’t have a clue (or do they?)!”

Within 15 minutes, Amazon stock had fallen into the red. Amazon stock price plummeted 7% and the company lost more than $50 billion in market value.

A clue for traders

Trump’s tweets give short sellers and investors a reason to follow him on Twitter. A tweet from the president Trump cause the value of a stock to change swiftly, thus giving investors the opportunity to make money.  In almost every case, when the president unleashes his Twitter, the share price of the companies is significantly affected either positively or negatively.

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