clock menu more-arrow no yes mobile

Filed under:

The Volfefe Index, Wall Street’s new way to measure the effects of Trump tweets, explained

The president is tweeting more — and he’s moving markets with it.

President Donald Trump on a screen at the New York Stock Exchange, December 20, 2018, in New York City.
Drew Angerer/Getty Images
Emily Stewart covers business and economics for Vox and writes the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

President Donald Trump is moving markets more with his Twitter account.

The president’s tweets have become increasingly consequential for some investors in recent months, specifically when it comes to interest rates and bonds. According to analysts at JPMorgan, who created and coined the “Volfefe Index” — a combination of the word “volatility” and the infamous Trump “covfefe” tweet (more on that in a bit) — Trump’s missives related to trade and monetary policy, specifically, have been pushing markets around.

JPMorgan isn’t the only one on Wall Street making note of the power of the Trump tweet as of late. Bank of America recently told clients in a note that the stock market tends to fall slightly on the days Trump tweets a lot more.

In other words, our extremely online president might be losing people money, and business strategists are trying to come up with a way to measure it.

The impact of Trump’s Twitter habit has long been debated in a variety of arenas — in the way it shapes media reporting, affects foreign policy, influences how other politicians act. There have also been questions about whether and how it might influence the market, which the president has often touted as a measure of his success.

Early on in his tenure, Wall Street seemed determine to ignore some of the weird stuff Trump was doing online, banking that tax cuts and deregulation would keep the good times going. But as of late, Trump is getting harder for traders to ignore, especially because he’s tweeting more about the issues that affect their day-to-day.

The Volfefe Index, briefly explained

The “Volfefe Index” is a reference to the great covfefe debacle of 2017, when the president in the middle of the night took to Twitter to complain about the media. Instead of tweeting about “constant negative press coverage,” he tweeted about “negative press covfefe.”

While that was silly — and the Volfefe Index a weird Wall Street attempt at a joke — what JPMorgan analysts found in their look at Trump’s tweets was not.

According to the analysts, Trump tweets using the words “China,” “billion,” “products,” “democrats,” and “great” were the biggest market movers. Specifically, they’re having an effect on two-year and five-year Treasury bonds and the volatility in their interest rates.

“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,” the analysts wrote. “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.”

They noted that the president’s market-moving tweeting “ballooned” in frequency in August, when the China trade war and the Federal Reserve were top of mind for the president.

As mentioned, Bank of America also recently reported related findings that Trump’s tweets can be bad for the stock market. According to its analysis, since 2016, on days with more than 35 Trump tweets, the stock market has fallen a bit, while on days with fewer than five Trump tweets, it’s gone up.

Trump tweets a lot, and what he’s tweeting about is hitting closer to home for investors

It’s easy to see that the president has a heavy Twitter habit, but when it’s put in concrete numbers, it’s even more jarring. By JPMorgan’s count, Trump or others using his account have tweeted more than 10,000 times after his inauguration, and he tweets nearly every day. And if it feels like he’s tweeting more, he is: His Twitter activity picked up in late 2018 and has been especially heavy in recent months. And he’s not just tweeting a lot, he’s retweeting a lot, too.

The analysts also looked into what time of day Trump is tweeting. They found that noon to 2 pm Eastern Time is “the most likely window within which a new remark will hit the tape,” in other words, right in the middle of the trading day. They also found that 3 am tweets are more common than 3 pm tweets, and the president is pretty quiet from 5 am to 10 am. They figure that’s when he’s sleeping.

Trump’s rapid-fire tweeting is causing whiplash for a lot of people, including for investors. In the early days of Trump’s presidency, Wall Street was pretty set on looking away, but that’s starting to change, especially as it becomes clear that Trump’s trade-war-by-tweet is going to continue, as will his public bashing of Federal Reserve Chair Jerome Powell. I recently laid this out in a story for Vox:

As time has gone on and Trump’s trade tactics, specifically, have started to sink in, some of [Wall Street’s] optimism has started to dissipate. It’s not that the stock market has crashed under Trump; despite a pretty significant downward turn in December, it’s about right where it was this time a year ago. But the market has been bouncier, in part because of the messaging coming out of the White House.

“I wouldn’t necessarily say it’s the tweets themselves, but it’s the content of the tweets,” Kristina Hooper, global markets strategist at investment management firm Invesco, told me at the time. “For so long, the tweets were more opinion as opposed to actions or decrees. What we’ve seen this year is a movement more into actions.”