TRADING ON TRUMP'S TWITTERSTORMS

The inane daily witterings of the US president Donald Trump on social media platform Twitter have become notorious. 

Every day the septuagenarian rants about whatever has caught his attention, whether it be hurricanes not moving in the direction he had claimed, celebrities who dare to criticise him or publicly disinviting leaders of the Afghanistan’s extremist Taliban from secret talks in the US, just days before the anniversary of 9-11. 

Over the past year or so, Trump has also more frequently expressed his views about the US economy. He has particularly focused on the status of its trade (no surprise given the trade war with China) and why he believes Jerome Powell, the chairman for the US Federal Reserve that he picked, is failing at this job. 

Most of Trump’s written rants are dismissed by the world’s financial markets, but these economic and trade utterances do carry some weight. And JP Morgan believes it has found out just how much. 

“We find strong evidence that tweets have increasingly moved US rates markets immediately after publication,” the US investment bank revealed in a press release on September 6, noting that tweets about trade and monetary policy gained the most statistical evidence of shifting markets. 

JP Morgan has taken this information and used it to create an index that measures the impact of Trump’s tweets on rates volatility, which it named the ‘Volfefe index’ (after a garbled tweet the president once sent that included the letters ‘covfefe’). The idea is to demonstrate that Trump raises rates volatility when he tweets about it. 

Of course, JP Morgan risks becoming the target of some Trump Twitter outrage by creating the index. If the notoriously skinflint president ever hears about it he will likely be apoplectic that somebody other than him is making money off of his messaging. 

It could even cause a fresh twitterstorm. 

QUOTE OF THE MONTH

“You’re a fool if you think you can make money by expecting the [Hong Kong dollar-US dollar] peg to be removed”

The Hong Kong-based investment head of a large asset owner has short thrift with anybody looking to speculate that the Hong Kong Monetary Authority will opt to dissolve the Hong Kong dollar’s link to the US currency. 

GOING FOR GOLD

It’s hard to speak to a chief investment officer, fund manager or investment research analyst without hearing about concerns of toppy equity valuations, private equity funds sitting on filled-to-bursting warchests, or the trouble of finding bonds that don’t have miniscule yields. 

That’s all got investors worried about the state of valuations, and the vulnerability of the markets at a time when the economic prognosis of the world isn’t looking so rosy. 

That’s got wealth advisers pitching the most traditional of asset classes to their clients: go buy some gold. 

The argument is pretty simple. Unlike money, which can be magically increased, via printing presses or quantitative easing, there’s only so much gold in the world. And it’s seen as a beautiful metal in its own right. It’s also been popular for thousands of years. So why not buy it? 

That logic has seen the value of gold increase by 16.9% from $1,278.30 an ounce at the beginning of the year to hit $1,494.75 on September 10. It’s had similar increases on platinum (the price of which rose 17.48%% to hit $939.14 per ounce) and silver (it rose 16.46% to reach $17.97 per ounce). 

Does it make sense? After all, gold doesn’t offer dividends, or rent, or coupons. In the modern age of cryptocurrencies it almost feels like a quaint asset class to invest in. perhaps most damningly it’s not performed well, typically trading in a range of $1,200 and $1,280 per ounce since late-2013 until early this year. 

And yet, as investment experts keep saying, diversification is the best way to ensure returns. Adding a bit of gold, platinum and silver to a portfolio might at the very least work as a hedge if the more regular markets do suffer the sudden drop so many investors worry about. Gold’s time isn’t done quite yet.