It is another bad day for the global stock market due to Trump’s tweet habit. Trump’s tweets have been causing huge uncertainty towards the market and they could lead to market rise and fall. Why does the market respond to Trump’s tweets? First, Trump is the president of the United States, the largest economy on the earth. Secondly, as the president, Trump’s words can be used as a guidance of the US’s domestic and foreign policies. Thirdly, Trump’s tweets are generally believed to be spoken out of his heart.
However, what Trump has tweeted about has not always been true. Some tweets are his wishes, but due to the constraints and the reality, they have not come true. Moreover, some of his tweets are bluffing about the situation and his power in order to gain some advantages. Such tweets are not helpful to the reality if all parties are fully informed; however, the market is not fully informed about the situation, for example, the market will never know what exactly is happening in the negotiation room of the trade talk between the US and China, which is definitely known by the two governments. Therefore, the two governments know what will happen to the trade relationship between the two countries, but the market has to rely on the public information released by the governments. At the moment, the Chinese government has been remaining low profile about this important trade talk and there has not been much official information released by the US government. Under such circumstance, the market may have to rely on the information released via unofficial channels. One of the unofficial channels is Trump’s twitter account. As the US president, his information should be credible and accurate; therefore, the market takes the information coming from the US president as the real information.
Because there is a chance that the US president is not necessarily giving the truth, the market is acting volatilly when Trump tweets. Too much volatility is not good for investors, under such circumstance, I think nothing is better than Trump’s tweets.
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