Since the announcement of Donald Trump’s election in the United States and the Twitter tirade created by his fired from the hip Tweets, major city banks and trading houses have rushed to install highly sophisticated banking-compliant Twitter monitoring services to gain an advantage over their competitors. His impromptu tweets, that have the power to disrupt and move markets instantly, have panicked investment firms dedicated to proprietary trading. His social media rantings have prompted them to look for options to enhance their ability to quickly position assets in an advantageous direction following a tweet from The Trump.
Unpredictable Twitter attacks by a world leader mean major companies, banks and traders need an incoming fire early warning system to prevent the destruction of share prices – that’s where products and services such as those offered by Market EarlyBird are taking off.
“Trump is cavalier and unpredictable. He might Tweet something that raises the prospects of a US company with UK suppliers; he might Tweet something that is viewed positively for international trade or he might Tweet something that will have a negative effect on global security. Any of these actions could have a significant impact on global markets including the UK,” says Danny Watkins, CEO at Market EarlyBird.
The last six months has seen an exponential growth as banks and traders grapple to pre-empt the market uncertainty that accompanies Trump’s move into Office. Events such as Brexit and the US election each saw a surge in demand, and Trump’s continuing determination to “speak direct to the people” has highlighted the need for traders to get Tweets first hand.
Market EarlyBird is one of the companies that has reaped the benefits of Trump’s cavalier attitude to social media in an environment where, surprisingly, traders can’t simply be given a Twitter account. Critical to banks’ use of Twitter is the prevention of secret messages (think LIBOR fixing) or outgoing Tweets, but also the guarantee of confidentiality – nobody outside can track traders’ Follow lists. The challenge then becomes the sheer volume of Tweets to be monitored. The software analyses the form, style, and content of Tweets as well as sender reputation to identify financially-relevant Tweets. Key stories are curated as they emerge, ensuring breaking financial news is relayed to those trading or covering equities instantly, whilst Retweet velocity is also monitored to quickly notify users if a Tweet is about to go viral, even if they are not actively looking at EarlyBird.
Impact unpredictable social media engagement
The impact of unpredictable social media engagement can be significant, and there are already a number of examples where Donald Trump’s Tweets have affected share prices:
* Dec 6th 2016 “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more then $4 billion. Cancel order!”
Market reaction: stock slid to a premarket low of $149.75, down -1.6% from previous market close.
* Dec 7th 2016, Pharmaceutical and biotech stocks plummeted after Trump comments that the US would ‘save millions’ following a revised bidding process.
Market reaction: Nasdaq Biotechnology Index fell 3% in New York, Standard &
Poor’s 500 Pharmaceuticals, Biotechnology & Life Sciences Index dropped 1.7%, the biggest one-day drops for the indexes since October. Bristol-Myers Squibb Co. dropped 5.3% to $56.80 in New York, the steepest decline in three months. Novo Nordisk A/S fell 5.2% to 242.10 kroner at 10:25 a.m. in Copenhagen trading. And Dr. Reddy’s Laboratories Ltd. lost as much as 3.3% in Mumbai.
* Dec 12th 2016, “The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th”.
Market reaction: stock slid to an intraday low of $245.50 down -5.4% from previous market close.
* Jan 3rd 2017, “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!”
Market reaction: shares of GM, which were at $34.38 in pre-market trading, fell about one per cent; however, shares bounced back, rising one per cent before the market opened on the 4th Jan.
