J.P. Morgan analysts have created an index to quantitatively measure the impact of U.S. President Donald Trump’s tweets on Treasury yields.
The «Volfefe Index» name was inspired by one of Trump’s previous tweets which appeared to be about «constant negative press coverage» but had the latter world misspelled as «covfefe» instead.
«Trade and monetary policy have become an increasing focus for the executive branch, and everything from casual sentiments to seemingly formal policy intentions have been disseminated, globally and instantaneously, via this carefully scrutinized social media platform,» said a report from the bank.
«In response, a broad swath of assets from single-name stocks to macro products have found their price dynamics increasingly beholden to a handful of tweets from the commander in chief.»
Rising Volfefe
According to the bank, the index is no gimmick and there is indeed a «measurable fraction» of implied volatility observable through interest rate derivatives, especially those linked to shorter-term rates of two to five years.
J.P. Morgan analysts underline keywords that were most likely to move asset prices including «China», «billion», «products», «democrats» and «great». The bank also highlighted Trump’s tweeting volume with 10 tweets per day since the start of 2016, including 10,000 post-auguration in 2017, with the figure peaking in recent months.
