Trump Tweets, You Profit
Imagine being in the crosshairs of a Trump tweet.
The fallout from the president’s public criticism could be immeasurable, with his horde of nearly 60 million followers piling on.
On the flip side, Trump’s praise might make you famous or save your business from destruction, bringing you riches you never dreamed possible.
Or maybe the exact opposite happens…
Barry Ritholtz wanted to find out.
So a while back, he created a couple of indexes with the help of Bloomberg shortly after Trump was elected.
In one, he added companies Trump praised on Twitter. In another, he added companies Trump put on blast.
The results might surprise you.
As it turns out, the companies and CEOs who were the targets of Trump’s ire outperformed the stocks of the companies he praised online. In fact, the “Drain the Swamp Index” filled with companies Trump dislikes took the “Oligarch Index” to the woodshed:
“It not only beat the Oligarch again, it crushed it, rising 6.3%,” Ritholtz notes. “That is a 29 percentage point advantage for Trump’s most-hated companies over his most favored ones. This is [an] even bigger spread than the first year we tracked the indexes, when the spread was 23 percentage points.”
These results go to show that social media can have a huge impact on the market. But not always in the way you’d expect. It’s a lot more difficult to consistently book profits using social media mentions than simply watching what our Tweeter in Chief is chatting about on any given day.
Add in all the other market-related tweets and things get even more out of control…
Every second, around 6,000 tweets are posted to Twitter. Obviously, a tiny fraction of those are about stocks. And an even smaller fraction are useful.
That’s why we built SERINA — our Sentiment Recognition and Interpretation Algorithm.
The system we’ve built is a direct feed from social media companies’ servers — but it’s designed to only capture meaningful posts. The other 99.9% of the noise is ignored.
And while SERINA began waving the caution flag back in January, she’s been much more opportunistic in recent weeks, pointing to an increasing number of buy signals. As long as sentiment continues to be lopsided in favor of bulls, it makes sense to stay active in this market.
Tech stocks in particular continue to show the strongest bullish bias right now – they’re likely to keep on leading things higher.
When that changes, I’ll let you know.