JPMorgan Generates'Volfefe' Index to Monitor Trump tweet Effect

JPMorgan Generates’Volfefe’ Index to Monitor Trump tweet Effect

Analysts at JPMorgan Chase & Co. have created an index to estimate the effects of Donald Trump’s tweets on U.S. interest rates, which they state is on the upswing.

The’Volfefe Index’, named after Trump’s mysterious’covfefe’ tweet, indicates that the president’s tweets are having a statistically significant effect on Treasury yields. The amount of market-moving Trump tweets has ballooned in the past month, together with those including words like’China,”billion,”goods,”democrats,’ and’good,’ most likely to influence costs, the analysts found.

“Trade and financial policy have become an increasing focus for the executive branch, and everything from casual sentiments to apparently formal policy intentions are disseminated, globally and immediately, via this closely scrutinized social networking platform,” analysts headed by Josh Younger and Munier Salem wrote. “In response, a wide swath of resources out of single-name stocks to macro products have found their price dynamics to a couple of tweets in the commander in chief.”

The president has averaged approximately 10 tweets per day since the beginning of 2016, with 10,000 tweets happening after his inauguration in 2017, according to JPMorgan’s analysis. Trump’s Twitter action reached a low of five tweets per day heading into his official inauguration, but has picked up considerably since late 2018 — with his greatest number of tweets in the previous four years happening in recent months.

JPMorgan’s investigation looked at Treasury yields in the five minutes following a Trump tweet, and the indicator indicates the rolling one-month likelihood that every missive is market-moving.

They discovered that the Volfefe Index can account for a”quantifiable percentage” of movements in implied volatility, found in interest rate derivatives called swaptions. That’s particularly apparent in the shorter end of this curve, with two- and five-year rates more affected than 10-year securities.

JPMorgan is not alone in trying to figure out the effects of the president’s Twitter action on markets. Analysts at Bank of America Merrill Lynch released a note last week concluding that times where President Trump tweets relatively often tend to see negative returns of 9 basis points normally. Days with fewer Republican tweets tend to see positive returns of 5 basis points normally.

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