The Trump Twitter Effect on Wall Street and The Economy

It is no secret that president-elect Donald Trump is a very potent force through his Twitter account, as his unpredictable and seemingly unfiltered exchanges have often become more newsworthy than the news Trump is commenting on. Time and again, Twitter has proven to be the perfect platform for the real estate mogul and reality television host to effectively bypass the press, which Forbes magazine wryly claims he “fired” upon winning the 2016 presidential election. Trump continually ducks press conferences, vilifies it as an institution, and publicly attacks its members whenever they may be critical of him. In a world where fake news seems to be a larger and larger problem, Donald Trump has set a precedent for offering information that he deems pertinent directly to the public with no buffers, filters, or fact checking. This is the Trump Twitter Effect at work, but what’s most alarming, however, is just how much movement occurs on Wall Street regardless of whether or not Trump is even speaking specifically about economics. The Trump Twitter effect states that when “The Donald” tweets, money moves.

Positives of the Trump Twitter Effect 

Since being elected, Trump has refrained from tweeting words about “Wall Street”, “Goldman Sachs”, “hedge funds”, or anything directly related to stocks or the economy. Nevertheless, when Trump tweeted that Exxon Executive Director, Rex Tillerson would make a “great secretary of state on December 11, Exxon stock prices jumped up 2.2%. Then, two days later when the president elect confirmed Tillerson’s appointment, Exxon stock jumped an additional 1.7%. A week later, after Trump congratulated an announcement by Softbank to invest $50 billion in the United States, their stock price lept up a full 12%. It’s almost as if by simply mentioning a company or executive in a positive light can spell greater success for them by the market.

Negatives of the Trump Twitter Effect

Conversely, when Trump is being negative, the effects on the market can be disastrous for certain businesses as Macy’s found out last January. Trump blasted them on Twitter for being “very disloyal” after deciding to no longer carry his branded clothing and their stock dropped 2.8%. Trump displayed this level of power before even being considered a potential winner for the presidency. Now, this week, exactly one year later CBS News has reported that Macy’s is closing 68 stores and sacking 10,000 employees. While this is likely the result of much more than the tweets of Donald Trump, starting a near 3% stock deficit is never a good position to be in starting a new year.

Trump’s twitter presence has even affected military aircraft developer Lockheed-Martin when in early December 2016, the president-elect criticized the expense of the F-35 military plane program. According to The Guardian, Trump claimed the multi purpose aircraft’s cost was “out of control” via twitter, and this led to the Lockheed Martin shares dropping by $13 each and a $4Bn deficit to the devaluation of the company’s value. The Guardian later went on to report that after a meeting with the heads of both Lockheed-Martin and rival aircraft manufacturer, Boeing, Trump tweeted the results of the meeting in which he asked Boeing to “price out” an older aircraft, the F-18 Super Hornet, as an alternative to Lockheed-Martin’s F-35 program. The Guardian goes on to say the following:“The F-18 is an older-generation aircraft that lacks the stealth capabilities of the F-35. Most defense analysts do not consider the planes comparable.”

Despite the potential lack of foresight, the future president’s tweet still caused Lockheed-Martin stock to dip to the lowest point since the November election. Even in aerospace and defense, Donald Trump’s twitter is proving to be a difficult obstacle to overcome or predict.

The Social Media Presidency

While President Barack Obama will be lauded as the first United States president form whom social media was an instrumental tool, Donald Trump will be considered the president that not only defined it, but wielded it like a political sledgehammer; building and destroying with the power of mere opinion. While markets, and global economics are far from immune to manipulation, never has there been a more volatile and polarizing, and vocal force at the helm of the richest and most powerful country in the world.

Previous presidents have been content to take a more conservative approach to communicating with the public, using broader platforms to speak to their peers and constituents, such as public addresses, interviews across from trusted journalists, even well controlled ad campaigns during elections, and offering information to the Fourth Estate for the evaluation then dissemination to the wider population. The Trump Twitter Effect is completely challenging this tradition. Going forward, there is no way to know how much stronger his influence will become once he is sworn into office on January 20.

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