Trump’s Tweets Drive The Market

January 8, 2020

Kenneth Rapoza

After Fed Chairman Jerome Powell, the biggest influencer of the market over the last couple of years has been President Trump and his Twitter account.

Last night, when Iran hit two U.S. air bases in Iraq, Asian markets fell. Later in the night, one Tweet by Trump had U.S. markets reacting differently. “All is well”, Trump wrote. Gold fell. Oil fell. U.S. stocks rose.

Thanks to the above, the Nasdaq hit a record high on Wednesday. Iran also had something to do with it as their hit against U.S. military installments did not cause any casualties. Whether that was done on purpose or not, the market saw that as the best case scenario in response to the killing of Kassam Soleimani, head general of the Islamic Revolutionary Guard’s Quds Force.

If Jack Dorsey ever considered charging for Twitter, now is the time. This is especially true on financial Twitter, where investors use the platform to get news directly from the top.

Trump is as high up the FinTwit food chain as one can get. His tweet last night totally calmed markets this morning.

“I was sitting here trading like a mad man last night on the news, and all of the news was hazy,” says Brian McCarthy, a former hedge fund manager in New York and now chief strategist for Macrolens, an investment research firm that is mostly focused on China. “I’m flipping back and forth to CNN to Fox and there is no news through these filters. It’s all commentary. I talk to a lot of active traders and Twitter is now the place we go to get actionable, tradable news in real time. We can hear it now directly from the tippity top before it appears on Bloomberg,” he says.

According to London-based online trading platform, ETX Capital, the volume of trading in Trump’s first two years, and in the first mid-term were not only higher than previous elections, but they were higher than the average volume in the year in which they occurred. 

-Trump - In 2016, November saw an increase of over 10% in trading volume, a rise which was also mirrored in the midterms in 2018. Gold dropped by over 11%.

-Obama - Obama’s first year occurred during a bear market, with November having a 15% higher rate of trades than the rest of the year. 

-Midterms - Obama’s two midterms and 2nd election saw a decrease in trading volume, an average of -6.5% compared to the rest of the year.

Trump’s first year in office saw a 60% spike in trading volume over that of Obama’s 2012 term, and a 13% rise in the Dow Jones.

Trump has used Twitter to express outrage at the Democrats, the media, and to give clues as to what the Fed should do with interest rates. Many in the market believe that Trump’s incessant attacks on the Fed, which hiked interest rates during his first two years in office, ultimately led the Fed to stand down.

At this time last year, investors were all penciling in four rate hikes. They cut rates three times and stayed pat the fourth time on December 11.

Trump has also driven markets in the China trade war.

Investors use platforms like TweetDeck to filter credible twitter feeds from top level sources such as presidents and trusted reporters on the ground. Those who are good at mining that information like they would on a financial newswire, end up with news before it reaches the mainstream financial press.

Trump uses Twitter to make official announcements that drive markets. Many investors find it harder to live without it they are actively trading in these markets.

It’s not just Trump’s Tweets that are driving the markets more than any other president out there. It’s also his press conferences.

Like the one late Wednesday morning regarding the bombing of two military installations in Iraq by Iranian rockets. Markets doubled their gains during his short speech.

Trump said in a solemn tone that he would consider more sanctions, and would keep current ones in place. He blamed Iran for unrest in Iraq and Yemen. Trump also called on Russia and China to “break away from the remnants of the Iran deal and all work together to make a deal with Iran that makes the world a safer and more peaceful place.”

In a nod to the Iranians who protested against their government late last year, Trump said, “We must also make a deal that allows Iran to prosper,” adding that peace in the Middle East cannot prevail if Iran continued to promote hatred and war in the region.

A country whose semi-official mantras are “death to America” and “death to Israel” is hard to trust as a partner for peace.

Trump also said he would ask NATO to be more involved in the Middle East, rather than going it alone, a move that takes the President Bush-era “coalition of the willing” off the table. Markets began to rise quickly after he said that, up roughly 10 basis points.

He said the U.S. should work with Iran against ISIS, a Sunni Muslim militia seeking to oust non-believers from parts of the Middle East. Iranian Muslims are part of the Shia sect.

Lastly, Trump said he wanted peace with Iran, and wanted it to be a prosperous nation. The S&P 500 rose by more than 30 basis points soon after he left the podium.

“Twitter has go to be one of the most undervalued online properties,” says Vladimir Signorelli, head of Bretton Woods Research, an investment research firm. “It’s quickly becoming a Bloomberg killer. Who needs to go to Bloomberg when you can go to Twitter. If Michael Bloomberg was smart, he’d buy it. Find the market cap of all the major media and that should be Twitter.”

Trump has made Twitter great again, that is for sure.