How to look past the stock market’s reaction to President Trump’s tweets

Updated Thu, May 16, 2019, 7:40 AM

Lately, tweets detailing trade policy have rattled global stocks. It started on May 5, when President Trump tweeted about raising tariffs on imports from China. The tweet and subsequent tariff increases led to the most meaningful stock market pullback in months. As of May 13, the S&P 500 (^GSPC) declined roughly 5% from its May 1 intraday high.

Over the past two days, stocks rebounded thanks to a less hawkish trade tweet from President Trump saying “When the time is right we will make a deal with China.”

That seemed to have calmed investors, but it is anyone’s guess as to how the market will react after the next tweet.

That’s why Wall Street strategists who spoke to Yahoo Finance urge investors to tune out the noise.

David Nelson, chief strategist, Belpointe Asset Management

“Traders are tied to Trump tweets, but investors should look the other way. You’re not going to know if a tweet is policy or just a negotiating tactic to get a reaction out of an opponent. Even if we end up in a prolonged trade war with China, commerce will survive as supply chains adjust.”

Nick Colas, co-founder, DataTrek Research

“Every market has its eye-catching data points. When I started [my career], it was M1 money supply since Paul Volcker was so bent on reducing inflation. Now it’s presidential tweets. They will always have market impact for all the obvious reasons. The real risk to investors comes from letting tweets or any other single datapoint overly capture their imagination.”

JJ Kinahan, chief market strategist, TD Ameritrade

“I think what we’re seeing is another example of the market hating uncertainty. The tariff negotiations are definitely something that the market is unsure about. Therefore, the market will move off any information that is viewed as insight —including any statement through any medium from a leader on either side of the negotiations. It’s this uncertainty that is leading to volatility.”

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Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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