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January 20, 2017 at 09:14 AM
With the inauguration ceremony over, Donald Trump is now the nation’s 45th president — and he has a new Twitter handle, @POTUS.
“Together we will make America great again,” President Trump said during his speech at Friday’s event.
Given Trump’s proclivity for using Twitter, one Wall Street insider quipped, “Trump’s tweets increase the opportunities for day trading. Let’s make America trade again!”
The president’s tweets over the past few weeks have helped bump up the stock price of Ford, while putting a dent in Lockheed Martin’s shares, for instance.
Tech firms like Trigger Finance have developed mobile applications — aka “Trump Triggers” — to let investors know when the president tweets about an individual stock.
Just after his inaugural speech, the new president — using his older @realDonaldTrump handle — declared: “We will follow two simple rules: Buy American & Hire American!” (That probably won’t help the shares of IT consulting groups like Infosys and Tata.)
What does a tweeting president mean for advisors and their investor clients?
For some advisors, like James Osborne, CFP, of Bason Asset Management, it is a cry for diversification and investing that focuses on indexes, for instance, rather than specific equities.
“T***p presidency might be the single best reason to avoid individual stock risk in a long time,” Osborne said on Twitter earlier this month. “Never know who is the next target of ire.”
Other market watchers point out that Trump’s tweets are a new source of volatility that investors have to consider.
“This is unprecedented,” said Mike Loewengart, head of investment strategy for E-Trade, in an interview. “It’s tough to say, though, if this will continue after Inauguration Day or not and become the norm. If so, investors of all shapes and sizes are going to have to get used to it and consider [its implications] for all their investments over different time horizons.”
Core and Satellite
In early January E-Trade found that 60% of millennial investors were trading off of Trump tweets. Plus, nearly 40% of investors of different ages were doing so.
“Clearly millennials are the most likely [group of investors] to respond to Twitter and have been placing Twitter-based trades,” Loewengart said. “They … clearly recognize the power of social media when it comes to potential trades.”
The E-Trade poll also discovered that half of investors are changing their portfolio allocations or are moving from cash to new positions as Trump takes office.
“These tactics should be conducted within the context of investors’ long-term goals and with monitoring,” Loewengart said.
