- Trump often takes to Twitter to both criticise the Federal Reserve Chief and to vocalize trade policy.
- Goldman Sachs analysed just how much of an effect these Tweets are having on markets.
- Traders and investors believe that his Tweets do indeed influence Fed policy, albeit via trade.
- “Markets believe that the President primarily affects Fed policy indirectly by influencing the macroeconomic outlook,” economist Ronnie Walker wrote.
- View Markets Insider’s homepage for more stories.
Donald Trump isn’t shy about tweeting his opinions on the Federal Reserve and the trade war.
Goldman Sachs crunched the numbers on the impact, analysing the president’s Tweets to find that “the evidence that President Trump’s trade-related tweets affect market expectations of Fed policy is strong.”
As a result, Goldman said that these findings show that traders and investors believe that his Tweets do indeed influence Fed policy, albeit via trade, whereas there was “at most, a limited perceived role for tweets criticising the Fed.”
Trump’s tweets have been studied for market impact before. A JPMorgan bot in September released a report saying it analysed 14,000 Trump tweets and found they’re having an increasingly sharp impact on markets.
Goldman said this week that its economists looked at Trump’s tweets “to include not only tweets that criticise the Fed but also tweets that directly or indirectly threaten tariff escalation.” From there, they looked at Fed funds futures for changes half an hour after the tweets.
“Markets believe that the President primarily affects Fed policy indirectly by influencing the macroeconomic outlook,” economist Ronnie Walker wrote in a note to clients.
The bank added: “The moves in the Fed funds futures market following such tweets are statistically highly significant, and the cumulative impact across all such tweets in our sample is about -40 basis points when we include both tweets indicating escalation of trade tensions and tweets indicating de-escalation, and about -60 basis points when we focus only on tweets indicating escalation.”
The note released on Monday found that there was “weak evidence for the notion that the market moves its monetary policy expectations in response to Presidential tweets criticising the Fed.”
Goldman added: “Statistically, the moves in the Fed funds futures market following such tweets are not significantly different from those in any given market interval, and the cumulative impact across all of these tweets in our sample is only -10 basis points.”
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