Sunday, 05 July, 2020


From 'covfefe' to 'Volfefe': New index tracks Trump volatility

Trump's tweets have been impacting volatility according to JPMorgan From 'covfefe' to 'Volfefe': New index tracks Trump volatility
Conrad Doyle | 10 September, 2019, 14:31

JPMorgan Chase announced on Sunday its creation of the so-called "Volfefe Index" to measure how President Donald Trump's tweets impact rates volatility.

The index tracks more than 12,000 of Trump's tweets since he took office.

Analysts at JP Morgan noted that while their current analysis was limited to USA interest rates, such an exercise was easily transferable to equity or currency markets.

Dubbed the "Volfefe Index" in a nod to Trump's freakish "covfefe" tweet, the index examines how the President's tweets influence volatility in the bond markets.

President Donald Trump tweeting habits have always been speculated to move the markets, but now there is a way that would supposedly measure it, courtesy of J.P Morgan.

Trump's tweets often hit the market around lunchtime on the East Coast and can cause a lot of indigestion.

JPMorgan analysts suggest that trump's tweets have a statistically significant impact on the yield of government bonds, mostly in two - and five-year paper.

JPMorgan

While the index's "utility in scoring any given tweet is somewhat limited", the bank said, it added that it works "as a supervised machine learning exercise - specifically we can train a classifier to infer how likely each tweet is to move markets".

The analysts also noted that "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".

To be sure, while market-moving tweets may be on the rise, in recent months, these tweets have garnered fewer likes and retweets than other contemporaneous remarks, the analysts found.

"This makes rough sense", wrote the analysts who created the index, "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".

"And you will be extremely shocked at the numbers many, many times what you think", Trump said, speaking to reporters outside the White House as he left for a trip to North Carolina.

More tweeting by Mr. Trump means more opportunities for tweets that move markets, although only some of them actually do.

The markets experienced deep dives in summer as Trump intensified its tariff war with China, yet the Dow is up 42% since the 2016 presidential election.

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