It’s a sad state of affairs, but investors have come to terms with it. If you own individual stocks, Donald Trump’s Twitter feed has to be on your list of mandatory daily reading material.
As we saw in December, the President-elect sees nothing wrong with blindsiding investors (not to mention entire countries) via social media.
Now, corporate management teams live in perpetual fear of getting the Lockheed Martin treatment. Here’s what I wrote a few days back about the perils of trading in a 140-character world:
As for Trump being the living, breathing, embodiment of a tail event, note that the commander-in-chief in waiting fits the definition of a “grey swan” quite nicely and nowhere is this more apparent than in his tweets about publicly traded companies. These tweets are “rare” (as a percentage of the total number of Trump tweets we get in any given timeframe) but “expected” (we know that sooner or later, he’s going to tweet something that moves markets). That matches Nassim Nicholas Taleb’s definition of a “grey swan” perfectly.
How, as investors and traders, are we supposed to deal with this? How can we be confident that we haven’t just made a trade that will move against us thanks to a couple of deft taps from Trump’s (small-ish) thumbs? How frustrated will we be when we lose money not because an analyst downgrades one of our holdings (and if you’re connected at all, you’ll probably know ahead of time if the axe is about to drop on a name you own) but because the leader of the free world fired off 140 characters at 3:16 in the morning?
Well, the new commander-in-chief is at it again and this time GM is the target of an impromptu Twitter tirade:
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017
GM shares immediately slumped in pre-market trading. Keep an eye out during the regular session to see just how much “stock” (pun fully intended) investors put in Trump’s latest Twitter tape bomb.
For those who might have missed it, here’s a bit of color (via Stratfor) on Trump, NAFTA, and supply chains – it seems particularly relevant in light of the above…
But unlike the TPP, which has yet to enter effect (and never will, by all appearances), the North American Free Trade Agreement has been in place for more than 20 years. In that time, trade relations among the United States, Mexico and Canada have deepened to an extent that will be difficult to reverse. Since his Nov. 8 victory, Trump has tempered his rhetoric, and it now seems unlikely that his administration will take any drastic action on NAFTA. Even so, retooling the trade bloc will have far-reaching repercussions on businesses and entire economic sectors throughout the NAFTA area. A look at the U.S. and Mexican automotive industries reveals the challenges that await Trump in his endeavor to counter the effects of more than two decades of North American economic integration.