Trump’s return invokes memories of 24/7 tweets rocking markets

Trump’s ‘America First’ policy, which includes sweeping tariffs on foreign-made goods, is widely expected to hurt financial assets across Europe and emerging markets.

Donald Trump is back – and so is the risk of social-media posts that can come at all hours with the power to roil global markets.

Trump’s resounding win in the US election has already had a big impact, sending the dollar soaring, pushing the S&P 500 to an all-time high, and leading to a surge in Treasury yields as traders assess the inflation impact of more tariffs.

It has also brought back memories of his first term. Trump’s market-moving posts included a damning verdict on trade negotiations with China, which sent stocks in the country reeling, and a tweeted threat to levy tariffs on Mexico that weakened the peso and fueled worries about the impact on auto stocks.

ADVERTISEMENT CONTINUE READING BELOW

“We used to call them Twitter bombs,” said Matthew Haupt, a portfolio manager at Wilson Asset in Sydney. “It is how he negotiates.”

For many investors, Trump’s second term will mean closely monitoring X, formerly known as Twitter, as well as Trump’s own social-media platform Truth Social, his primary conduit to the public.

Trump’s “America First” policy, which includes sweeping tariffs on foreign-made goods, is widely expected to hurt financial assets across Europe and emerging markets. Major stock indexes in Europe and China fell as the results emerged on Wednesday, although Japanese stocks got a boost.

The pace of Trump’s tweets as well as their ambiguity was a source of volatility in his first term. In 2017, his mysterious ‘covfefe’ tweet stumped markets, fueling a guessing game about a potential hidden meaning. In 2020, the former president once tweeted or retweeted just under 40 times in the space of two hours, causing a whiplash in US and international equities.

“It will be 2016 all over again,” said Wong Kok Hoong, head of institutional equities sales trading at Maybank Securities Pte. “Markets will have to embrace more volatility and moves based on Trump’s social media comments. In fact, I have just set up a Truth Social account just to make sure we don’t miss anything!”

Trump’s trade negotiations with China and others will be fertile ground for social media surprises as he rolls out his protectionist policies. During his first term, Trump frequently took to X to threaten or implement trade tariffs on allies and rivals alike that stoked a global trade war.

“If you’re a HF fund, you’ve just re-weighted your natural language processing models to react to X,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “Especially through the tariff negotiations, he will take to X to push his agenda and the noise will ramp up.”

© 2024 Bloomberg

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.