The financial markets always react to news, but President Trump’s proclivity for tweeting government policy decisions—or his thoughts pertaining to a particular issue or individual—are a seemingly constant barrage that can impact the moods of Mr. Market.

The ongoing trade spat with China is an example. It began in early 2018, has lingered like a bad cold ever since, and this summer escalated to dangerous levels. It’s natural to assume that Trump’s tweets about this kerfuffle can influence market moves, but do they really?

To find out, Scott Ladner, chief investment officer at Horizon Investments, and his team analyzed all the president’s tweets from January 2018 through this year’s first half and zeroed in on three key words: “China,” “trade” and “tariffs.” They used the S&P 500, the China A shares market and the VIX as proxies for the market and measured market reactions on the day the tweets came out. On days when the tweets were issued after the markets closed, the Horizon team looked at the next day’s trading activity.

“This is how the president communicates; this is how he gets his message out,” says Ladner, whose Charlotte, N.C.-based company provides investment strategies and services to financial advisors. There are all sorts of ways to organize and analyze Twitter, so we tried to figure out precisely if his tweets really impact the markets.”

When the word “China” itself was mentioned, both the S&P 500 and China A shares typically had a positive reaction. “When he mentioned China it’s usually to allay market fears,” Ladner says.

The use of “trade” itself resulted in the biggest negative reaction in China A shares, while the mention of “tariffs” correlated with the biggest spike in the VIX and with the largest negative reaction in the S&P 500, along with a decline in Treasury yields. But the use of “China” and “trade” together was generally followed by a slight rise in yields.

“The most interesting result from this work is when he mentioned China, tariffs and trade in the same tweet it has a negative impact on risk markets both in terms of the S&P and China A shares,” Ladner says. “It had a positive impact on bonds and a negative impact on rates, and it had the most pressure on the VIX.

“When [Trump] combines all three words together, the market really seems to notice and ascribe importance to it and it didn’t react positively,” Ladner adds. “In the nine times he mentioned all three, the markets had a uniformly negative reaction in the risk markets.”

Ladner and his team noticed that Trump talks about President Xi Jinping only in respectful terms. “He’s not one to shy away from describing political foes with pejorative nicknames, but he hasn’t taken that path with Xi,” he says.

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