Finance and Economics > Economic News, the Global Economy and all Things Monetary

JP Morgan Volfefe Index tracks interest rate volatility following Trump's tweets


Mr. Bill:
Reuters, 9/9/19: 'Volfefe': a volatility index for the Trump era

--- Quote ---...In the report, which runs well over 4,000 words, J.P. Morgan analysts use machine learning techniques and their own volatility model to show how the president’s 280-character missives served to raise investors’ expectations for future moves in the U.S. [interest] rates market.

While the direction of price moves and their lasting power may be uncertain, Trump’s tweets often spark a sharp reaction across asset classes. ...

The index can explain a measurable fraction of moves in the market’s forecast of likely movement in rates, particularly the shorter duration 2-year and 5-year rates, the analysts said.

Trump’s most market-moving tweets dwell on trade, and, to a lesser extent, monetary policy, with the words “China,” “billion,” “products,” “dollars,” “tariffs” and “trade” making the top list, the JP Morgan analysis found. ...

Separately, analysts at Citigroup (C.N) found that a wide range of currency pairs logged higher-than-expected volatility within a one-hour window after a Trump tweet. ...
--- End quote ---

It does make me wonder: if somebody knew what a Trump tweet was going to say before it got posted, would they be able to profit?

If they were a slick trader, very possible

David in MN:
To distill all global markets down to one Twitter account is a little specious. Bear in mind these are the financial wizards who thought housing was stable in 2007, though Solindra was a wise government investment, and still park money in Theranos despite it being a clear Ponzy scheme run by a criminal. And these same fools who bet against me when I shorted GE in 2017 will turn around and tell you that nothing... Not profits, not contracts, not sales, not mergers or acquisitions, not any business of any kind matters more than a throwaway line on Twitter?

If that's your investment plan I deeply hope I am competing with you. Because I'm going to waste my time with fund prospectus and track dividend growth and look into business growth and margins. Basically the boring stuff you bloody hire JP Morgan to do. Unfortunately they think all that work can be done in 140 characters. That is bordering on a financial crime. Reminds me of the long gone days where we would trade based upon Greenspan's tie. It's just as stupid today.

If you want to invest you need to do your homework. That's how it has always worked.


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