TRUMP TWEET-STORMING YOUR STOCK?
Relax, writes Joe Chidley, the effects don’t tend to last, with values rebounding fast.
Against the collective global fascination with Donald Trump and his contentious foray into the U.S. presidency, we should remember that who sits in the Oval Office does not necessarily determine the outcome, texture and quality (good or bad) of every facet of life on Earth.
Most individuals still eat, sleep, work and play pretty much like we used to. And most companies will continue to make or lose money pretty much according to how well they run their businesses, their competitive position, and the determination (or lack of it) of their leaders and employees. So, too, will those companies’ shareholders.
Before his inauguration and even during his tempestuous young presidency, Donald Trump has made no bones about publicly targeting companies with his vitriol. We’ve seen how his utterances can move a company’s stock. Trump tweets, stock falls.
Here’s the thing, though: If you’re worried about presidential tweet storms damaging your portfolio — or more generally about the psychology of a president who thinks attacking individual companies on Twitter is appropriate — you can take heart in the fact that the Trumpattack effect doesn’t seem to last very long.
A case in point was the assault Wednesday on Nordstrom for dumping his daughter Ivanka’s eponymous clothing line from stores. The president found time to tweet that the venerable luxury retailer was treating Ivanka “so unfairly… Terrible!” White House spokesman Sean Spicer later characterized Nordstrom’s decision as “an attack” on Trump’s daughter.
Notably, all this happened five full days after Nordstrom announced it was no longer going to carry the Ivanka Trump line — which must have given some short sellers a nice little window of opportunity.
In this case, however, the opportunity might have been on the other side of the Trump trade. After the Nordstrom bash on @realDonaldTrump at 10:51 a.m., the stock did dip, by about half a per cent. But within 20 minutes it had regained the lost ground, and finished the day up more than three per cent. (On no other news, by the way.)
This isn’t an isolated case. With most of the targets of Trump’s twittering, the sturm-und-drang pattern of tweet-and-decline hasn’t really held.
Back in December, Boeing Co. was in the president-elect’s crosshairs for “out of control” costs on a new Air Force One. After he tweeted “Cancel order!” on the morning of Dec. 6, Boeing stock dipped by a per cent. But it soon recovered, and kept going. In fact, since Dec. 6, Boeing shares are up more than seven per cent.
Or consider Lockheed Martin, whose shares took a tumble after Trump tweeted on Dec. 12 that the “F-35 out of control.” Another critical tweet on Dec. 22, in which Trump threatened to get Boeing (!) to provide a competing bid, sent the stock down at one point by about two per cent — more than US$1 billion in market cap. But today, Lockheed Martin has more than regained the ground it lost after Dec. 12, and is up 2.5 per cent this month alone.
Then there’s General Motors, which was the target of a Trump tweet on Jan. 3. He claimed (erroneously) that GM was importing Mexican-made Chevy Cruze autos to the U.S. tax free, and threatened to hit them with “big border tax!” GM shares dipped about a per cent, but recovered on the same day, and then went on to gain more than nine per cent over the next three weeks. (It’s since given most of those gains back, as investors worry about 2017 profits.)
Is there an opening for investors in this pattern, should it continue? (And let’s face it — it will.)
Well, the pattern is not absolutely consistent. For instance, Toyota stock took a hit in early January after Trump, fast on the heels of his GM tweet, threatened a “big border tax” on cars the Japanese automaker may import from a new facility in Baja, Mexico. Shares have gone on to lose more than six per cent — although that probably has more to do with weak earnings and profit margins than anything Trump has threatened. If you’d bought Toyota on the presidential dip, you’d be kicking yourself about now.
The main point here is that Trump’s corporate Twitter attacks, however vitriolic, are pretty impotent in moving share prices, except in the short term. That’s not surprising, given that — on the economy, at least — lots of noise, and not much substance, has characterized his presidency so far. For investors, for now, for better or worse, it’s business as usual, at least until Trump gets around to backing up his tough tweets with actual policy.
After the Nordstrom bash on @real Donald-Trump at 10:51 a.m., the stock did dip, ... (but) finished the day up more than three per cent.