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However, Trump’s tweets on trade matter fairly little for major markets, according to a new research note from Goldman Sachs.
The GS team identified several key phrases — like “trade” and “tariff” — and constructed a daily count of the number of times the president mentioned it on his Twitter feed. They also calculated a 3-day moving average to account for weekend tweets and their impact on the market. Using the data, they ran a regression of the volatility index (^VIX) to see how his tweets may have sparked activity in the stock market.
They found that there was no obvious relationship between the Twitter mentions and the VIX.
The VIX, an index built by the Chicago Board Options Exchange (CBOE), looks at the market’s expectation of 30-day volatility. It’s derived from the implied volatility of S&P 500 index call and put options.
Typically, the VIX will go up when there is more anxiety, fear, and volatility.
When they looked at daily soybean returns against the index of tweets (while controlling for the Economic Policy Uncertainty Index and the fluctuations in the U.S. dollar), the analysts found that Trump’s tweets had a significant impact on soybeans.
Soybeans have been particularly vulnerable because “it is not possible to completely reroute supplies should China levy tariffs on U.S. soybeans,” the analysts said.