Content area
Full Text
How much emphasis do you put on a tweet? According to JP Morgan and its recent ‘Volfefe Index’, 280 characters is all US president Donald Trump needs to shock the markets. The aim is to create an index “to measure the impact of the president’s tweets on rates volatility”. However, with algorithmic trading and tweet aggregation commonplace, many market participants are unconvinced that the index brings anything new to the table.
Trump has over 64.2m followers on the social media site, making him “probably the most watched Twitter account with any connection to the capital markets”, according to one head of DCM.
For market participants, a Trump-linked volatility index is only one of many tools used to monitor fluctuations in markets.
“Indices around Trump tweets are not something new,” said one bank strategist. “There have been algorithms trading for a while around information on employment, and reacting to specific words like ‘tariffs’ in his tweets.”
“They are not the only ones to correlate Trump’s tweets with what happens in the market,” said the head of DCM. “Most people sit on their screens while also having Twitter open anyway.”
The ‘Volfefe Index’, named for a portmanteau of volatility and an infamous late night Trump tweet that used the word "covfefe”,...