How Trump Tweets Affect the Stock Market – Is It Stock Manipulation?

In recent months, President-elect Trump has posted a variety of Tweets, usually critical, about a number of major U.S. stock exchange listed companies, including Boeing, Lockheed Martin, United Technologies, Ford, General Motors and Toyota.  The Tweets had an immediate impact on the stock values, especially when Trump’s comments were negative.  In many cases, short-sellers jumped in and profited as the stocks dropped in price. His Tweets directly caused harm to stockholders who may have planned to sell stock on those days and sent shock waves through the financial markets, causing some investors to accuse him of stock manipulation.


(Public photo from USA for Trump Twitter Account)

The investors who question whether the Trump Tweets border on market manipulation point to the definition in Wikipedia as “a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency.”  His Tweets do appear to have artificially affected the value of these companies by hinting that when Trump takes office he would single-handedly make sure their products would be less profitable in the future or there would not be a market for them, if they did not do what he wanted, such as lowering prices or moving plants to the U.S.  The Tweets often caused stock prices to drop, even though there was no current change in the sales, profitability, or markets for the products being sold by the businesses mentioned in  the Tweets.

The Tweet below is just one example of the hundreds of posts on Twitter which question whether or not Trump is engaged in stock manipulation.  The opinions expressed online indicate that investor confidence in the stock market is being undermined by the effect of Trump’s Tweets.

In the past, most presidents and president-elects have had private meetings with corporate executives or contacted them by phone if they had a concern about an action being taken by a company.  The use of social media as a tool to embarrass, chastise or praise a company can have an almost immediate effect on stock values, both the value of the company mentioned in a Tweet, as well as the value of their competitors, depending on what is said.

On Dec. 2, 2016, President-elect Trump surprised investors with a Tweet saying, “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion.  Cancel order!”  The Tweet was posted at 8:52 a.m. Eastern time that day, approximately 40 minutes before the stock market opened, which gave short sellers and investors plenty of time to place orders to sell the stock.  Boeing stock fell sharply after the market opened, although it recovered a few days later after Boeing executives met with Trump and assured him that the new Air Force One could be built for much less than $4 billion.  There is some question about where Trump found the $4 billion number, since Boeing executives insist it was never going to cost the government that much, anyway.

The impact on Boeing stock shocked investors who watched as the company dropped $1 billion in value the morning he released the Tweet.  The USAF News posted a link to an article a few weeks later explaining to its readers how Trump’s Tweet about Boeing had harmed more than just Boeing … it had hurt the stability of our capital markets.

A few days after the the issue was settled between Boeing and Trump, Boeing quietly tried to smooth things over with Trump by making a $1 million contribution to help pay for expenses related to the Trump inauguration.

However, the President-elect was not finished with commenting about companies on Twitter.  Just a week after the Boeing Tweet, Trump posted another  Tweet on Dec. 12, 2016 about the F-35.  The negative impact on Lockeed Martin stock was swift and dramatic.  His Tweet simply stated, “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 20.”  This Tweet caused Boeing stock to get a bounce upwards and caused Lockeed Martin stock to fall sharply.

On Jan. 5, 2017, the President-elect then turned his attention to the auto industry, starting with Toyota.  In a new Tweet he said, “Toyota Motors said it will build a new plant in Baja, Mexico, to build Corolla cars for U.S.  NO WAY!  Build plant in U.S. or pay big border tax.”  Within hours of posting that Tweet, the value of Toyota stock began to drop.

Other companies which have seen their share values change rapidly after Trump Tweets include Rexnord of Indiana, United Technologies (Carrier Air Conditioning), Ford Motors, Nissan and General Motors.  Some of his Tweets have caused stocks to increase in value, which is what happened with United Technologies after he announced Carrier Air Conditioning would be keeping some of their production in the U.S.  Most companies, however, have seen their stock values plummet after a few words from the president-elect.

Trump’s Tweets actually give short sellers and day traders a reason to closely follow him on Twitter and quickly react to his Tweets about companies which are listed on the stock exchange, because they know that a Tweet from the president-elect will cause the value of a stock to change swiftly, thus giving them the opportunity to make money.  Investors are well-aware of the profit potential which these Tweets open to them, as shown in the investor Tweet below:

The Tweets also arouse suspicion in investors who believe that Trump’s family and friends may be capitalizing on the power of his words.  The Tweets below are two examples of the online comments which have been made by people who are speculating that Trump or his family have made money off his recent Tweets.  Whether they did or not, it is inconceivable to many investors that a U.S. president or president-elect could undermine the  confidence in the financial markets in this way.

In addition to the direct effect which Trump’s Tweets have on stock values, his Twitter comments about China and other foreign governments could have an effect on international trade agreements, possibly spurring a trade war.  This could hurt a wide variety of American corporations which do business overseas.  China is already beginning to threaten retaliation against businesses such as Boeing.

Many investors and analysts are speculating that so many U.S. corporations could be hurt by a trade war, it would hurt our economy much more than it would help.  Whether this is true or not, Trump’s Tweets are increasing corporate and investor nervousness and undermining confidence in our financial markets.

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