How much power do Presidential tweets actually have on markets?
In a time when we can be more connected in society through technological advances than ever before, I feel as though most of us are less connected today then we may have been 10, 20, or even 30 years ago. I remember the days when we didn’t have email or cell phones. You had to call a home phone or drive to a person’s house and knock on the door. Those days are long gone as our children spend more time texting then talking with their friends.
Which leads me to this month’s article on President Trump and his social media use.
Never in the history of our great nation has a president personally used more social media than Donald Trump. Love him or hate him (that’s for you guys to decide), his tweets have given us unprecedented insight into what the most powerful man in the world is thinking on a regular basis. Since the election, a number of well-known companies have been targeted by these tweets. This has been done so many times that it is just one more thing we watch for in market fluctuation. This small 140 character message is so important that they are considered official presidential statements by the Department of Justice.*
To give you some perspective, over the last 2 years here are some of the companies that happened to be in a tweet at the wrong time.
1. January 3, 2017 General Motors – Tweeted about General Motors sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across the border. He said “Make in America or pay big border tax.” After initial tweet, General Motors stock lost a total of $361 million; however, it only took less than 1 day to recover.
2. March 31, 2018 Amazon – Tweeted that the USPS would lose $1.50 for every package it delivered for Amazon. After the initial tweet, Amazon stock lost a total of $47 Billion Dollars and it took 4 days to recover.
3. August 12, 2018 Harley Davidson – Tweeted about Harley Davidson manufacturing overseas. After the initial post, Harley Davidson stock lost a total of $375 million and it took 7 days for it to recover.
Overall there are signs that the overall market has learned to ignore tweets.** Though company stocks swing a bit when President Trump tweets, there are signs that the market has learned to take these tweets in stride. Goldman Sachs analysts found that tweets matter fairly-little for major markets. Do these tweets drive the market crazy? Sometimes they do and sometimes they don’t. More direct ways tweets affect the market are:
- Fiscal Policies that affect business and economy
- Executive order that can affect company bottom lines
- Power over appropriations for companies that rely on federal government revenue
The market can be affected by a tweet here or there, but over the long term, the market tends to mirror underlying economic fundamentals; however, short term, the market can turn on a dime, reacting unpredictably to a variety of events. Smart Investors don’t focus on what happens in minutes and hours but keep their goals in sight and focus on a solid financial strategy for the days, months, and years to follow.
If you have any concerns about the markets and not reaching your goals, give us a call at the office (470) 839-9001 we would be happy to help in any way we can. You can also tweet us at…. 😊
Advisory services offered through Wealth Watch Advisors, LLC, a SEC registered investment adviser. Insurance services offered through Arseneau Advisory Group. Wealth Watch Advisors, LLC and Arseneau Advisory Group are not affiliated.
We analyzed the share prices of companies President Trump directly mentioned on Twitter. Our analysis indicated change in share price from the closing price the day before the tweet mention to the lowest price post-tweet (except for GM). Days to Recover is the number of trading days it required for the price to reach pre-tweet close. Initial post-tweet loss was calculated by multiplying the post tweet change in price by market cap reported the day prior to tweet.
- GM: https://www.marketwatch.com/story/gms-stock-falls-after-trump-tweet-on-mexico-production-2017-01-03
- Sources: Sources: Twitter, Yahoo Finance, Macro Trends, Bloomberg