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During the recent stock market dive, the Dow Jones Industrial Average bounced back slightly. Banks, investment firms and market analysts track fluctuations in financial markets to capture trends like weather, mergers and international relations.
In light of recent events, JP Morgan added a new market indicator: the Volfefe Index. It tracks how Twitter posts including false claims by President Donald Trump manipulate markets.
Trump recently came under fire for the market bounceback created by a lie about trade talks resuming with China. In other cases the Dow tumbled because of Trump tweets.
JP Morgan Chase—which uses the JP Morgan brand for their investment banking, asset management, private banking, private wealth management and treasury services divisions—announced the new Volfefe Index with a detailed explanation for its necessity.
"The subject of these tweets has increasingly turned toward market-moving topics, most prominently trade and monetary policy."
"And we find strong evidence that tweets have increasingly moved US rates markets immediately after publication."
JPMorgan has a new index — called the “Volfefe Index” — that measures Trump’s tweets and their impact on bond volat… https://t.co/uaPP2UseOp— Carl Quintanilla (@Carl Quintanilla) 1567950050.0
JP Morgan developed the index name by combining "volatility" and an infamous Trump tweet of the nonsense word "covfefe." An analysis of over 14,000 Trump tweets identified trends to create datasets for the index.
JP Morgan/JPMorgan Chase
The financial management firm added:
"We can use this dataset to perform a supervised machine learning exercise—specifically we can train a classifier to infer how likely each tweet is to move markets."
Among JPMorgan’s findings: there’s been an increase in what they call “market-moving tweets” — Trump tweets which a… https://t.co/a5qbyZimrN— Carl Quintanilla (@Carl Quintanilla) 1567950237.0
"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."
Here are the words Trump most frequently uses in this genre. (3/x) https://t.co/AalBMR7PXT— Carl Quintanilla (@Carl Quintanilla) 1567950313.0
But they’re increasingly LESS likely to be “liked” or re-tweeted. (4/x) https://t.co/D6XhVIIYxp— Carl Quintanilla (@Carl Quintanilla) 1567950473.0
Trump has averaged 10+ tweets a day since the start of 2016. “Starting in late 2018, however, activity has picked u… https://t.co/9yCEKKFTnT— Carl Quintanilla (@Carl Quintanilla) 1567950848.0
People again cited the possibility of illegal market manipulation by the President.
@carlquintanilla Also known as market manipulation and is illegal.— lil mermaid🆘 (@lil mermaid🆘) 1567957295.0
@rateslady @carlquintanilla But Trump is above the law.. remember?— aracooper (@aracooper) 1567980095.0
@carlquintanilla Does anyone not believe that Trump is moving the market for personal benefit?— Allan Golombek (@Allan Golombek) 1567989170.0
@carlquintanilla They should have a Shortfefe version for when Trump could be shorting specific companies or sectors to enrich his family.— Sanho Tree (@Sanho Tree) 1567955531.0
@carlquintanilla When you, as the POTUS can move markets with the stroke of the hand, that is manipulation plain an… https://t.co/l3v5UMmZ0s— Dr. snEvil (@Dr. snEvil) 1567988282.0
Although the President did have some defenders.
But they received pushback.
@realAnastaciaB @voxin2 @carlquintanilla @realDonaldTrump If he is saying what he is saying in order to intentional… https://t.co/O7hwMSpDDJ— Casey Tetley (@Casey Tetley) 1568038188.0
@carlquintanilla @realDonaldTrump @NicolleDWallace Billions of dollars are made or lost based on tweets by a comp… https://t.co/gJafTpTfFt— bbrook (@bbrook) 1567959387.0
While many questioned legality, market traders cried foul over playing with their livelihood.
@carlquintanilla @AdamSchiff @SpeakerPelosi @SenSchumer @SenBlumenthal @SenatorLeahy This madness HAS to stop.… https://t.co/KdczIseT57— kathy (@kathy) 1568061027.0
@carlquintanilla Now it's even easier for his billionaire friends to frontrun on what he is going to tweet. Is the… https://t.co/GhWHAxVCzD— Androidema (@Androidema) 1567974633.0
@carlquintanilla @JohnJHarwood A more interesting index would be a list of profiteers of same.— Charles (@Charles) 1567951831.0
As of Tuesday, September 10 it is 419 days until the 2020 presidential election.
Not sure how the stock market works? The book The Beginner Investor: A Beginner's guide to Stock Market Investing is available here.
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