What should investors make of the Trump “volfefe” index?
By: Tim Bennett
A new index claims to capture the impact of Donald Trump’s tweets on markets. In this video, Tim Bennett investigates the “volfefe”.
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What should investors make of the Trump “volfefe” index?

Another week, another index! This time City analysts have come up with, what they claim, is a way of measuring the impact of Donald Trump’s tweets on markets. So, how does it work and is it useful to long-term investors?


Donald Trump is something of a Twitter addict – since taking power in the US in 2016, he has released around 10,000 of them. And because of his position at the top of American politics, JP Morgan reckon they have an impact on markets and have attempted to capture it in one number.


Before we go any further, an obvious question would be; why “volfefe”? The answer seems to lie with a mysterious tweet that Trump put out a few years back in which he used the term “covfefe”. Analysts decided that an amusing mixture of that word and volatility would result in “volfefe”, and so the name of the new index was born.
The next question is therefore; what is it for?

What JP Morgan want to know

For their purposes, JP Morgan focused on interest rates, on the basis that Trump seems willing to comment on interest rate policy frequently, even though the Federal reserve, which sets them, is supposed to be entirely independent. Their theory is that this “politicisation” means that Trump can alter the market’s view of what the next interest rate move might be. This is reflected in interest rate forecasts, in particular relatively short-term ones.
However, other banks seem to think that his influence extends further than just that.

It’s not all about bonds

Citigroup have looked at his impact on certain currency pairs and reached the conclusion that his Twitter activity has an impact;

The trigger words

It seems that some of Trump’s words matter more than others – put it another way, he uses some words frequently in his more inflammatory comments. According to JP Morgan, the “hot” words that can produce a market-moving impact, are the following five.

And, as they conclude;

For investors

The key issue here for long-term equity investors is then this – interesting as this research no doubt is, what bearing does it have on the stock market? Enter a piece of research from Bank of America.

Clearly there is some sort of short-term “Trump effect” on share prices. However, that phrase short-term is the key here. Whilst day traders and speculators may be hanging on the contents of even single Tweets, the bottom line is that long-term investors shouldn’t worry too much about what I call “noise” (even when it comes from one of the most powerful men in the world) unless and until some sort of long-term impact can be proven. This seems unlikely to happen anytime soon, even assuming Trump survives the next US election round. The overall conclusion? Enjoy Trump’s tweets if you have the time but don’t let them influence your investment approach.

To find out more

Feel free to email me at [email protected] or contact an Adviser.

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