If you cast your mind back to Donald Trump’s surprise election as the President of the U.S. on November 8th, 2016, you’ll remember that America’s financial markets positively to the news.
The Dow Jones, the S&P and the Nasdaq all rose by between 1.1% and 1.4% in the aftermath of the announcement, for example, partially negating the ripples of panic that flooded through the global markets during the same period.
Since this time, Trump has become Wall Street’s cheerleader in chief, presiding over marked growth at the end of 2016 and through 2017 while often taking to Twitter with his unfiltered views and opinions. But what impact do the President’s impromptu tweets have on the markets, and how to fintech applications react?
The Truth About Trump’s Tweets and the Financial Markets
During the stock markets’ sustained rally throughout 2017 (the Dow Jones industrial index has since experienced its worst percentage decline since 2011), Trump consistently took credit for this growth while tying it explicitly to his own policies and outlook for the U.S. economy.
In fact, the 45th POTUS has tweeted directly about the stock market more than 60 times since his election, often talking in overtly positive terms and presenting himself as a key driver of growth. This is unusual for any President or individual who has been elected into office, thanks primarily to the volatility of market movements and potential for assets to decline as quickly as they appreciate.
Interestingly, Trump remained silent as the Dow Jones and the S&P indexes declined during the first quarter, as he avoided the keyboard and made no mention of this depreciation during another self-congratulatory speech in Ohio.
While it may tempting to suggest that stock market growth has little or nothing to do with Trump’s economic policies, there is merit to the argument that the current POTUS has a prominent influence on the financial markets. This is not necessarily in the way that Trump would imagine, of course, but it is directly associated with a steady delivery of news and insight through his Twitter feed.
More specifically, sophisticated traders with automated programs and experience are now leveraging algorithms to capture Trump’s tweets in real-time and analyse their likely impact. Then, associated stocks are either bought or sold accordingly, with the most successful proponents of this strategy achieving significant profits as a result.
Beyond this, intuitive online platforms are now collating tweets from Trump and similarly influential world leaders on a daily basis, before relaying informed sentiment and analysis directly to traders. This is perpetuating a cycle of trading behaviour and establishing Trump as a key influencer in the marketplace, as investors look to profit regardless of whether individual tweets have a positive or negative impact on the associated stocks.
The Last Word
The last point is important, as the modern financial market and sophisticated trading platforms enable investors to profit even in a depreciating climate.
So, Trump does not necessarily need to implement a successful policy or offer genuine insight through his Twitter feed, so long as investors can accurately pre-empt the impact of the President’s communications and inform their decision-making accordingly.
While Wall Street and other marketplaces remain tight-lipped on this practice, there’s no doubt that it’s increasingly commonplace in the digital age. As for Trump, he’ll continue to tread the fine line between perception and reality, while continuing to wield a growing (if somewhat unintended) influence on the nation’s stock markets.
