Donald Trump used the social network Twitter daily during his tenure as the 45th president of the United States, and many of his tweets were related to economic issues. As U.S. head of state, he did have access to classified information that he could have published via Twitter earlier than through other communication channels. However, a working paper by the Leibniz Institute for Financial Research SAFE shows that Trump rarely disseminated news with the potential to actually influence financial markets in his tweets. On the contrary, Trump's Twitter activities predominantly revolved around topics that were already priced into markets.
“Donald Trump's Twitter messages have mostly been reactions to pre-existing trends in financial markets,” says Zorka Simon, a researcher in the Financial Markets department at SAFE and one of the authors of the research paper. “So, looking at historical market data tends to help predict whether or not Trump will tweet on a particular topic.”
As the study shows, while some individual tweets posted by Trump did indeed have the potential to affect markets in the short term, financial markets managed to classify the information content of those tweets: They did not react when Trump's tweets did not contain any significant information but merely contributed to the “background noise” of the general news situation.
An average of seven tweets per day
Trump was an exceptionally active Twitter user during his time as U.S. president. From the beginning of his presidency in November 2016 to end of December in 2018, he sent more than 5,500 Twitter messages, averaging seven tweets a day during that period.
For their analysis, the researchers evaluated around 1,400 Twitter messages on the topic of the economy that Trump posted from his Twitter account @realDonaldTrump during the observation period. Trump addressed economic topics more frequently in his tweets over time. While he sent out 481 tweets on these topics in 2017, the number had already risen to 811 in 2018.
In the SAFE Working Paper, the researchers categorize these tweets into four thematic groups: (1) economy, Federal Reserve, stock markets; (2) employment, job creation, U.S. industry, manufacturing; (3) U.S./China trade war; (4) U.S. trade relations with North America, NAFTA, trade, and U.S./Mexico and U.S./Canada tariffs. In addition, the tone of the tweets was included in the analysis, i.e., whether Trump expressed approval, disapproval, or a neutral stance.
Zorka Simon, Ph.D.
Advanced Researcher in the SAFE research department Financial Markets
Phone: +49 69 798 33704