Donald Trump's tweets swing the market - the 'Volfefe' index proves it


In the report, which runs well over 4,000 words, J.P. Morgan analysts use machine learning techniques and their own volatility model to show how the president's 280-character missives served to raise investors' expectations for future moves in the US rates market.

JPMorgan Chase announced on Sunday its creation of the so-called "Volfefe Index" to measure how President Donald Trump's tweets impact rates volatility.

The president has found the middle value of approximately 10 tweets every day since the beginning of 2016, with 10,000 tweets happening after his introduction in 2017, as per JPMorgan's investigation. Named after Trump's infamous "covefefe" tweet, the "Volfefe Index" suggests that the President's tweets have increasingly moved the United States rates markets immediately after they were published. It found that his tweets generally followed a stretch of volatility across global currency markets. "Accordingly, a wide swathe of benefits from single-name stocks to full scale items have discovered their cost elements progressively obliged to a bunch of tweets from the president". Called the "Volfefe Index" after Trump's "covfefe" tweet from May 2017, it will analyse the president's musings on the microblogging site and see how much of an impact they have on the markets.

August Trump tweets included the shock announcement on August 1 that the USA would impose new tariffs on $300 billion of Chinese goods, as well as a series of escalating attacks on Federal Reserve Chair Jerome Powell. The number of his posts that affect the markets in recent months has increased significantly.

Trump's most market-moving tweets dwell on trade, and, to a lesser extent, monetary policy - with the words "China", "billion", "products", "dollars", "tariffs" and "trade" making the top list, the JP Morgan analysts found.

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Trump blamed the Fed chief for the inverted yield curve on August 14 and questioning whether Powell was a "bigger enemy" than Chinese leader Xi Jinping on August 23.

Specifically, 146 out of some 4,000 non-retweets the president made during market hours from 2018 to the present were shown to make an impact.

In a note, JPMorgan analysts say Trump's tweets "have played a statistically significant role in elevating implied volatility". On days with fewer than five presidential tweets, the market has risen.

Since 2016, on days with more than 35 Trump tweets, the U.S. market has fallen slightly.