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JPMorgan Introduces Volfefe Index


JPMorgan Chase & Co, one of the largest banks in the world and the largest in America, has created an index to estimate the impact of the President of the United States of America, Donald Trump’s twitter activity to the capital market. The index, titled “Volfefe” itself is inspired by Trump’s mysterious tweet “covfefe,” a meaningless word which Trump accidentally tweeted in May 2017. “Volfefe” is a combination of two words, volatility and “covfefe”. In their research, JPMorgan’s analysts suggest that the president’s tweets have statistically significant impact to the volatility of two- and five-year tenor bond rates. The index provides a way for analysts to explain Trump’s impact to the financial world more concretely, dubbing his tweets as “market-moving”


The market-moving tweets by Trump frequently reveal his decision and outlook as the president of a global superpower, with tweets referring to the global economy and its newest phenomenon, with words such as “China,” “billion,” “products,” “Democrats,” and “great,” which most likely affect prices in the capital market. Analysts in JPMorgan found strong evidence that Trump’s tweet creates perception to his supporters, his followers, and financial analysts everywhere and directly affects US market value. They also found that Trump’s tweets attract other users to retweet or reply to his tweets which sometimes leads to discussions.


In August, Trump frequently used his Twitter account to rebuke The Fed and to pressure Jerome Powell as the head of The Fed to cut the interest rate and overcast China in trade war. Most of Trump’s outlook as tweets usually affect the market at noon. According to JPMorgan, Trump would usually post 3 more tweets than usual at 13.00 PM. Also, Trump’s tweets at 3 in the morning are more common than his tweet at 3 in the afternoon. This could prove to continue become a potential disruption for US market’s interest rate, as the depth of last night’s market tends to be thin. In addition, based on Bank of Merrill Lynch’s data, data shows that market as a whole falls due to Trump’s frequent habit of tweeting his and the government’s outlook. In his three-year leadership as The President, the market has fallen with the average nine basis points because of said habit. When Trump tweets thirty five or more tweets a day, usually the day will end with a market fall. However, if he tweets less than five a day, then the market will rise by 5 basis points a day on average.


Sources:

Bloomberg

CNBC

Vox


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