How investors should think when a single Trump tweet moves markets
As the U.S.-China trade war rages on and a possible recession looms, the White House’s unpredictable rhetoric has been so inconsistent that businesses are unsure of how to proceed. And so it’s no surprise to see the financial markets seesaw along with President Donald Trump’s Twitter feed.
“How do you invest in this environment? ... When a tweet can move a market 200 points intraday, if not even more?” Yahoo Finance’s Brian Sozzi wondered on a recent episode of Yahoo Finance’s The First Trade. “Do you buy some stock and hold off the next 25 years? What you do?”
Brian Levitt, the U.S. senior director for investment strategy at Invesco, told Sozzi that it depends on an investor’s time horizon.
"I mean, for somebody like me, my policy statement is I got to send two kids to college and get them out of my home, and I’ve got some years to do that,” Levitt told Sozzi. “I'm going to try and grow the base. You know, I'm not looking for safety or income, right now. So my view is ‘This is going to be a slow growth world for ... a lot of the rest of the time.’”
In other words, long-term investors have time to weather this short-term volatility. And so instead of monitoring the president’s Twitter feed, investors should focus on the long-term picture for what drives the market.
‘There’s a lack of clarity on trade’
On August 23, Trump had demanded U.S. businesses stop doing business with China and threatened immediate tariffs. The market fell 600 points. But his tone changed Tuesday, saying that he was confident that a deal would be reached, and soon, and the markets rebounded.
....better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..
— Donald J. Trump (@realDonaldTrump) August 23, 2019
That was just the latest in the market whiplash that happens when the president takes to Twitter. Earlier in August, shortly after the Fed cut interest rates, Trump tweeted that the U.S. would be imposing a 10% tariff on an additional $300 billion worth of Chinese goods, starting in September (he has since pushed those back to December to avoid hurting the holiday shopping season). The S&P tumbled after those tweets and closed down almost 1%.
Of course, a number of other factors aside from the president’s Twitter feed may be influencing the markets.
“I mean, I've always been of the belief that, you know, hating the government or focusing on the executive branch of government should not be your investment strategy,” Levitt said.
NOTE: This story was originally published on August 28, 2019.
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Ashley is a Production Assistant for Yahoo Finance. Follow her on Twitter @actuallynelson
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