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JP Morgan creates market-moving Trump ‘tweet index’

(File Photo by Jaap Arriens/NurPhoto via Getty Images)

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The financial markets are skittish and react to the slightest provocations. One thing quick to affect the bond market is a tweet from President Donald Trump.

So much so that J.P. Morgan has devised a “Volfefe Index” to analyze how Trump’s tweets are influencing volatility in U.S. interest rates, according to CNBC — the index is named after the president’s mysterious “covfefe” tweet.

(On May 31, 2017, just after midnight, Trump tweeted and then deleted a confusing partial sentence: “Despite the negative press covfefe.”)

An example of the impact of the president’s tweets was seen last month in the tension with China over trade and when Trump expressed his dissatisfaction with the Federal Reserve on interest rates.

The J.P. Morgan index “explains a measurable fraction of the moves in implied rate volatility for 2-year and 5-year Treasurys,” CNBC reported.

“This makes rough sense as much of the president’s tweets have been focused on the Federal Reserve, and as trade tensions are broadly seen as, first and foremost, impactful on near-term economic performance and, likewise, the Fed’s reaction to such developments,” the J.P. Morgan report said.

An in-depth analysis was done on Trump’s tweeting and found that since taking office, he has averaged more than 10 tweets a day to his nearly 64 million followers.

More from CNBC:

Out of about 4,000 non-retweets occurring during market hours from 2018 to the present, only 146 moved the market.

Most of Trump’s tweets come around noon to 2:00 pm, with a 1:00 pm tweet roughly three times as likely to arrive at any other hour of the afternoon or evening, according to J.P. Morgan’s report.

Trump’s 3:00 am tweets are also more common than 3:00 pm tweets, which can be a nuisance for U.S. rates markets, since overnight market depth tends to be thin.Trump is presumably asleep from 5:00 am to 10:00 am, according to the report, since there’s a lull in tweeting activity during that time.

Citing Bank of America Merrill Lynch, CNBC noted that days when the president is tweet-happy are “associated with negative stock market returns.”

“We find strong evidence that tweets have increasingly moved U.S. rates markets immediately after publication,” the J.P Morgan report stated.

(Not lost in all the analysis is the Dow Jones Industrial Average closed at 19,827.25 on Inauguration Day, Jan. 20, 2017, and closed Friday at 26,797.46.)

CNBC’s Carl Quintanilla shared on Twitter bullet points on the Volfefe Index:

He also shared graphs showing the impact of President Trump’s tweets and the most frequently used words, according to the report.

The likelihood of the tweets being “liked” or retweeted was also tracked, as was the time:

Naturally, the Trump-hating cabal assigned nefarious motivations to the president’s actions.

Here’s a quick sampling of some of those responses from Twitter:

Tom Tillison

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