When Donald Trump tweets, it creates volatility in the market, and this happens often enough that JPMorgan Chase has come up with a way to track his impacts on the financial markets — a new schema they’ve called the “Volfefe Index.”
According to HuffPost, analysts needed a way to be able to see how the president’s social media messages were changing the market. So they created an index that looks at the words Trump uses, in addition to when he sends his tweets, in order to create an index that tracks how the market shifts as a result.
This metric was dubbed the Volfefe Index after the recently coined word “covfefe,” which Trump famously tweeted without explanation. Trump has repeatedly attacked the Federal Reserve as the market has begun to show signs of cooling during his trade war with China. Those attacks have had a direct impact on the market, which is something that analysts want to be able to track.
JPMorgan analysts addressed their decision to create a new index in a report.
“Trade and monetary policy have become an increasing focus for the executive branch… via this carefully scrutinized social media platform,” they wrote. “In response, a broad swath of assets from single-name stocks to macro products have found their price dynamics increasingly beholden to a handful of tweets from the commander-in-chief.”
JPMorgan analysts also said that they found a direct, measurable impact on two and five-year treasury bills.
“We find strong evidence that tweets have increasingly moved U.S. rates markets immediately after publication,” the JPMorgan report reads.
Previous presidents have avoided publicly criticizing the Fed because of the impact it can have on the market, but Trump has frequently made the department a target of his social media attacks. He often comments on his trade war with China, and on the Fed’s policy. JPMorgan found that words like “China,” “billions,” “products,” and “Democrats” have the greatest impact on the market.
Four years ago, it would have been absurd to even think of. But there is now an index to gauge the impact of presidential tweets on market volatility. Inauguration Day 2021 cannot come soon enough. https://t.co/d0IEnNACmY— Barbara Boxer (@BarbaraBoxer) September 9, 2019
Tweets that contain this language are also often liked and retweeted less often by Trump’s followers.
Analysis shows that the president’s tweets seem to have a negative impact on the stock market. As Trump’s tweeting has increased over recent months, the market has become more volatile. Of approximately 4,000 tweets since from 2018 to the present during market hours, 146 have caused a shift in the market.
The bank didn’t point out any specific tweets as being particularly damaging to the market, but it maintains that Trump’s social media posting has a direct impact on the financial markets.