(Bloomberg) — The Kaakboner-in-Chief is back.
During his first term, Donald Trump’s incessant tweets were a must-read for Wall Street types, whether they liked it or not. He crowed when the stock market rose, criticized Federal Reserve Chairman Jerome Powell when it fell (“Where did I find that guy Jerome?”), bullied CEOs who irritated him and threatened to impose tariffs and sanctions on countries around the world. .
At all times, day and night, policymaking via Twitter – renamed X – became the norm, delivered in staccato bursts to his millions of followers. These musings often caused sudden market swings, upending the work and sleep schedules of traders and investors in the financial markets.
“I remember being constantly aware that something could happen at any moment,” Steve Sosnick, chief strategist at Interactive Brokers, said of Trump’s first term.
With Trump storming back to reclaim the White House after Tuesday’s vote, Sosnick and the rest of Wall Street are preparing for a redux of it all, with posts on his Truth Social platform and more. That’s because no president in modern history has had his fortunes so closely intertwined with the financial markets. Nor has any leader of the free world so publicly made rising stock prices such a crucial barometer of his success.
Based on market movements alone, Trump tweeted at least 100 times during his time in office, including mentions of the “Dow,” “Nasdaq,” “bull run,” “gains” and “winning streak,” data compiled by Bloomberg. Joe Biden, consistent with previous presidents, has done the same on the site only a handful of times, including this year when the S&P 500 passed 5,000 for the first time. “We’re actually going back to a situation where you can hear almost everything,” Sosnick said.
Trump scored a decisive victory this week, causing more swings in asset classes. The S&P 500 rose to a record high, while small caps had their best day in two years. Bond yields and the dollar soared as traders worried higher rates and budget spending would revive inflation and undermine trade.
Despite their differing approaches, returns differed little between governments. The S&P 500 rose 64% after Trump’s 2016 victory and Biden’s November 2020 victory. Under Biden, the market is up 69%.
But Trump’s tendency to tweet about the markets was a sign of his presidency. In December 2019, as the Dow Jones peaked, he tweeted that he would “never get tired of telling you that.” Wall Street is bracing for more.
“It would be hard for that tiger to change its stripes,” said Art Hogan, chief market strategist at B. Riley Wealth. “That’s one of his main means of transmission for thoughts that he has.”
The newly elected president has a long history of berating and pressuring Federal Reserve officials. In March 2019, he reported that the Fed had “accidentally raised rates” and “implemented the ridiculously timed quantitative tightening.”
During his campaign earlier this year, Trump told Bloomberg News that he would let Powell finish his term as long as he “did the right thing.”
The jabs were not limited to Powell. Trump used his pulpit to threaten tariffs — the S&P 500 fell for four consecutive sessions in early May 2019 as Trump vowed to raise them as part of his ongoing trade war with China — or to threaten companies and business leaders who had fallen out of favor . The market impact of such tweets was often significant, although it diminished somewhat as traders became accustomed to the vitriol over time.
“He’s not going to speak in generalizations,” said Steve Chiavarone, senior portfolio manager and head of multi-asset solutions at Federated Hermes. “He’s going to make calls and try to give examples of specific companies that are publicly traded stocks in the hopes of influencing their decision-making,” he said, with Trump likely pointing to companies he could potentially pressure into manufacturing and manufacturing operations doing. production in the US.
History supports this view. When General Motors Co. bogged down in union negotiations in 2019, Trump complained “Here we go again with General Motors and the United Auto Workers,” and also blasted the company for moving factories to China. Not every CEO deserved his wrath. In 2020, he said Tesla Inc.’s Elon Musk, who emerged this year as a key campaign ally, did a “great job” in agreeing to build a factory in Texas.
Potentially worsening the impact, markets have become more of a 24-hour affair since 2020, with companies like Robinhood Markets Inc. and Interactive Brokers Group Inc. have added ways to trade US stocks 24 hours a day, five days a week. That means investors will react increasingly faster, Sosnick said.
“It increases the likelihood of intraday or individual stock volatility,” Sosnick said. “It can certainly lead to excessive movements if liquidity is thinner.”
–With help from Abhishek Vishnoi and Neil Campling.
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