President Donald Trump's tweets on trade have much more of an impact on the market's expectations for Federal Reserve monetary policy than his tweets directly criticizing the central bank, Goldman Sachs said.
President Donald Trump's tweets on trade have much more of an impact on the market's expectations for Federal Reserve monetary policy than his tweets directly criticizing the central bank, research by Goldman Sachs has showed.
There's only "weak evidence" that President Trump's tweets criticizing the U.S. Federal Reserve move market monetary policy expectations, Goldman Sachs said in a research paper published Monday, but there is "strong" evidence that his trade-related tweets do affect market expectations of Fed policy.
They then compared these potentially tweet-affected episodes with all other 30-minute intervals of market activity to see whether there were statistically bigger moves. They then accumulated all of the moves in fed funds futures following tweets in each category to obtain the overall impact on the market's monetary policy expectations.is where traders bet on where the Fed's benchmark overnight lending rate will land.
"Once again, there are many tweets that garner little reaction, but there are also quite a few trade policy tweets that lead to sizable swings. This is intuitive, as there are clear channels through which tariff escalation can lead to a dimmer economic outlook," Goldman said.
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