President Donald Trump’s frequent Twitter posts move the stock market—but not for very long, according to an analysis of 14,000 of his tweets.
Investors probably remember the plunge in stocks in early August after Trump announced—through a series of tweets—that he planned to place 10% tariffs on $300 billion worth of imports from China, in addition to the $250 billion already subject to levies. The S&P 500 fell 0.9% that Thursday and tumbled almost 3% the next Monday as the Chinese yuan fell against the dollar and optimism over trade gave way to pessimism.
“Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal,” Trump tweeted on Aug. 1. “We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing.”
Such presidential tweets can drive the market, both up and down. But regardless of the content, just the raw number and frequency of the Trump’s Twitter posts can make a difference, too. Since 2016, days with more than 35 tweets by Trump have coincided with negative returns for the S&P 500 on average, while stocks have risen on days with fewer than five Trump tweets, according to Bank of America Merrill Lynch. The gap in performance is statistically significant.
But how does the market perform a few days after a Trump tweet? Barron’s conducted its own analysis of the market reaction to Trump’s tweets using data from the Trump Twitter Archive, a website that collects all the tweets from Trump’s account on a daily basis. We found patterns similar to the ones Bank of America identified, and more. The more Trump tweets, the more the market drops.
From the beginning of 2016—when Trump was already a leading presidential candidate but a year before he took office—until the end of August 2019, Trump has sent out more than 14,000 tweets. That’s about 10 tweets per day on average, and about 85% of those are original Twitter posts, not retweets. Trump rarely lets up—he’s only gone 22 days without tweeting at all during that period—and has been especially prolific this year. With four months to go in 2019, he’s already surpassed his totals for the previous two years by a large margin.
Take May 1, 2019, a particularly busy day for @realDonaldTrump. Trump sent out 84 tweets from 6 a.m. to 11 p.m. that day—about one every 12 minutes. More recently, he tweeted more than 60 times on Aug. 31, commenting on topics ranging from the trade war and gasoline prices to Hurricane Dorian and Fox News’ ratings. The morning, from 7 a.m. to 10 a.m. is generally when Trump tweets the most, with the three-hour stretch making up more than one-fourth of his total number of posts.
Still, not every day is as busy as that. For about one-fifth of the 1,300 days we studied, Trump tweeted fewer than five times, and the S&P 500 posted an average positive return of 0.13% those days—or on the next trading day if the tweets came during a weekend or holiday. That’s significantly higher than the average daily return of 0.02% throughout the entire period.
After 10 trading sessions, however, the outperformance that follows Trump’s quieter Twitter days is largely gone. The S&P 500 rose an average of 0.46% in the 10 trading sessions following Trump’s slower Twitter days, in line with an average 10-session return of 0.48% for the entire period.
On the flip side, for the roughly 7% of trading days when Trump tweeted more than 20 times, the S&P 500 posted an average daily loss of 0.03%. The market generally recovered within 10 trading days, with an average gain of 0.21% over that time. But that was still less than half the average 10-session return during the entire period.
The two biggest factors driving the market this year have been the trade war with China and the Federal Reserve’s moves on interest rates. Those are also areas of Trump’s preoccupation. There is clear evidence that when Trump tweets about trade and the Fed, it’s usually not good for the market. The word “tariff” was mentioned in 165 Trump tweets spread across 95 days. On those days, the S&P 500 declined an average of 0.12%. Trump has been a frequent critic of Fed Chair Jerome Powell. The terms “Powell” or “Federal Reserve” or “the Fed” showed up in 100 tweets spread across 67 days, and the S&P 500 fell by an average of 0.05% on those days.
The White House didn’t respond to a request for comment on how Trump’s tweets move the market.
While there is clear correlation here, it doesn’t necessarily mean the Trump’s tweets are single-handedly driving the market’s movement on a daily basis—notwithstanding a few occasions when he made tariff-related announcements on Twitter.
“Presidential tweets have become as common as pigeons in New York City and corn in Nebraska,” Kristina Hooper, Invesco’s chief global market strategist, told Barron’s in response to our findings. “They’re largely disregarded because market has become very desensitized.”
Trump’s tweets should be put in the same category as economic data and other daily news, Hooper suggested. In other words, investors should keep an eye on them, but don’t get caught up in the short-term ups and downs that follow. Instead, investors should focus on their long-term objectives and maintain a well-diversified portfolio in sync with those goals.
After all, as our data suggest, most of the market volatility on days with bombardments of Trump tweets will fade fast.