To say that Donald Trump has a thing for Twitter is putting it mildly and underrepresenting his use. Even before becoming president, Trump has used his social media account for denouncing celebrities to condemning the actions of the Obama administration.
With his ascent to the presidency, this state of affairs hasn’t changed. The only thing that has is who he’s targetting on a weekly basis. Unfortunately, where the now 46th president has been using his personal social media account, it’s become a legal case in a ‘bigly’ way.
The unfortunate reality for Trump is that his account has become, according to a US court, a public forum. Meaning that he’s not allowed to block people from his mind, making headlines in late May. While we’re aware of the effect, he has on the office of the president. The effect that he has on the economy. Specifically, stock markets have gone overlooked. Especially how the markets have suffered negatively and adapted to ‘The Trump Effect’.
The Trump Effect – Twitter and The Stock Market
With over 52 million people closely following him via his Twitter. It comes as no surprise that areas as sensitive to public opinion and speculation would react to his tweets. And that’s been the case for the US stock market and global markets as a whole. What’s ultimately ironic is that it doesn’t matter if the tweet is positive or negative. It coincides, in many instances, with the weaker performance of either the market or the US Dollar versus rival currencies.
The most recent example of this was June 5th, 2018:
While this sounds good, the reality is that the US’ labour force participation rate fell to 62.7%. This number is below the pre-2008 percentage of 66% and is a lower figure than before the election with depreciating job quality. One of the other effects was to hit the Dow Jones index by the close of business the same day. The Dow fell by 13.71 points yesterday with some credit going to the slapdash approach of Trump and his tweets.
Tweets that blunted S&P 500 momentum
According to Bloomberg, back in April, the running commentary provided by the president managed to affect the S&P. April, specifically, saw the likes of the S&P industrial index suffer from a slip downwards. The reason? Trump had unleashed a salvo of posts on the ongoing issues with trade with the US’ international partners.
This series of comments resulted in creating a shaky index while knocking it down by 1.4% in the days following. Kevin Caron, senior portfolio manager at Washington Crossing Advisors, has previously expressed frustration towards Trump’s view on the market.
“From the market’s perspective, it was all a constant stream of lollipops. You’re going to cut the taxes; you’re going to have a pro-growth policy, the federal government is going to invest a little more — all of that is happy stuff. Nasty, contentious trade negotiations? That’s a more dissonant kind of message.”
So Trump is fully responsible for market fluctuations?
Not necessarily, while his tweets have coincided with poor performance from the market and weakness in the Dollar. Correlation doesn’t equal causation, well-performing tech stocks and an underperforming industrial segment can be attributed for the S&P’s activity. Major names from Investec have pointed to these tweets as being an unhelpful force for the economy. But as for directly causing market fluctuation? That’s a harder question to answer.