Wall Street Is Betting Billions on Trump's Tweets
How much should we pay attention to Trump's tweets? For the financial industry, a single tweet could be worth more than the president-elect himself.
President-elect Donald slammed defense contractor Lockheed Martin Corp. on Monday, December 12. “The F-35 program and cost is out of control,” he tweeted. “Billions of dollars can and will be saved on military (and other) purchases after January 20th.”
Within a few hours, the company's market value had plummeted $4 billion; nearly four times more than the hit Boeing took after being singled out in a Trump tweet the previous week.
Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!— Donald J. Trump (@Donald J. Trump) 1481032355.0
“It’s uncharted territory we’re in, that’s for sure,” Stephen Massocca of Wedbush Equity Management told Politico. “You have to take each tweet and analyze it. Because he tends to lash out. But Boeing just hit a new high today, and I imagine the same will wind up being true for Lockheed. So if he does initially move the market, a smart trader can take advantage of that.”
It's not enough just to turn on notifications for the president-elect. According to Zachary David, a senior analyst at KOR Group, a consulting firm, we may see "full automation" in the near future.
“There are people diligently working to create algorithms for Trump’s tweets," David said regarding a potential strategy. However, “automating trades based on algorithmically interpreting the language of tweets is difficult because there is a high cost to getting the direction wrong."
Donald Trump has become the biggest "axe" on Wall Street, which could alter the index of entire industries.
"Trump wins, up goes the market because everybody has to run to cover and change their position," David Kotok, founder of Cumberland Advisors said in an interview with Financial Times about the unexpected post-election rally.
"This is a very exciting time to be on the trading floor," Stephen Guilfoyle, president of Sarge986 remarked ahead of the Wednesday Fed meeting. Though Wall Street may have enjoyed the Trump rally for a solid month, Guilfoyle believes "volumes may dip here for this weekend for next week regardless of what the Fed does."
Still, Guilfoyle predicts "a fairly violent January" when Trump takes office.
"Just look at the cages that Donald Trump is rattling with China, a lot of people are scared about that right now," Guilfoyle added.