The “Volfefe Index” was named after President Donald Trump’s mysterious “covfefe” tweet from May 2017 and suggests the president’s tweets have an influence on subsequent stock market movements in the U.S. and abroad.
Analysts at JP Morgan say that in forming the basis for their methodology, 14,000 tweets were used in the analysis to form the initial projections for their software. Their analysis determined that there were direct correlations between tweets and what was happening in the market.
This was most notably evidenced when the tweets specifically referenced financial matters including the US Federal Reserve. Even tweets issued during the regular working day were found to influence market sentiment, and because they come at any hour of the day or night, they apparently do have an impact on global markets.
JPMorgan has a new index — called the “Volfefe Index” — that measures Trump’s tweets and their impact on bond volatility. (1/x) D37ocdebxk
— Carl Quintanilla (@carlquintanilla) September 8, 2019
Key words in tweets include “China”, “billion”, “products”, “Democrats”, “great”, “dollars”, “tariffs” and “trade.” Interestingly, while the number of presidential tweets has increased substantially in the past month, they have garnered fewer likes and retweets than other contemporaneous remarks, the analysts found.
“Trade and monetary policy have become an increasing focus for the executive branch, and everything from casual sentiments to seemingly formal policy intentions have been disseminated, globally and instantaneously, via this carefully scrutinized social media platform,” analysts led by Josh Younger and Munier Salem wrote, reports the Financial Post.
“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.”
JP Morgan isn’t the only group looking closely at Trump’s tweets. Analysts at Bank of America Merrill Lynch are also following the ups-and-downs of the sometimes volatile market’s movement. JP Morgan’s research follows a report from Bank of America Merrill Lynch last week that found if Trump stays off the Twitter platform, the stock market fares better, according to Market Watch.
