Tags: investors | trump | tweets | markets

Investors Seem to Be Taking Trump Tweets Less Seriously

Investors Seem to Be Taking Trump Tweets Less Seriously
(Kaspars Grinvalds/Dreamstime)

Thursday, 28 June 2018 08:26 AM

Investors have been learning that President Donald Trump’s Twitter punches have had little follow-through, writes Bloomberg Opinion’s Stephen Gandel.

Take the latest recipient, Harley-Davidson Inc. The motorcycle manufacturer’s shares were off as much as 3 percent after his Tuesday morning tweet, only to quickly rally and return to near even by the middle of the day.

Soon after Trump took office, T-3, a marketing firm, launched a trading bot that would quickly short any company that Trump tweeted about negatively. The bot racked up large gains in early 2017. But Ben Gaddis, president of T-3, said the strategy had been more of dud recently. “Trump’s tweets haven’t been as big a source of outperformance,” he said. “People are starting to shrug them off.”

The biggest reason is there has been little follow-through.

Trump tweeted about Rexnord Corp. twice, threatening higher taxes specifically against it and other companies that move jobs overseas. But Rexnord closed its Indianapolis plant anyway and moved those jobs to Mexico. Rexnord has yet to suffer any presidential punishment. Instead, it has been rewarded, like the rest of corporate America. Rexnord’s effective tax rate plunged to 11.3 percent in the first quarter, down from 29 percent the year before.

"Harley-Davidson, as my colleague Brooke Sutherland pointed out on Monday, is a pretty good example of the kind of company that will feel the brunt of the disruption in a trade war," Gandel wrote.

Getting in front of that, by moving some jobs and production to countries where the goods will be sold, is a smart way for companies to react and probably a good move that will help its earnings and stock price.

The punishment Trump proposed on Twitter doesn’t seem as if it would hurt the company anyway because Harley doesn’t plan to import motorcycles made outside of the country.

The company’s decision most likely will not be “the beginning of the end,” as Trump tweeted. His exhortation the day before to exercise patience while he wins a trade war carries as much weight as his threats a day later. He probably can’t or won’t deliver on either, so companies need to make decisions in their best interests based on the situation in front of them.  

The bigger takeaway for investors is that Trump’s pull on the market is not turning out to be as strong as some thought. Stocks soared after the election on what seemed at first like the Trump Bump, but that gain has since been credited to last year’s earnings rebound.

Now, at least by one measure, the Trump stock premium has been mostly wrung out of the market. The average stock in the S&P 500 now has a price-to-earnings ratio, based on the next 12 months, of 16.9. On election day it was 16.8. It must be frustrating for a president who uses Twitter as a megaphone and stock prices as a barometer of success to realize that his barrages are rapidly becoming simple bluster. 

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The punishment Trump proposed on Twitter doesn’t seem as if it would hurt the company anyway because Harley doesn’t plan to import motorcycles made outside of the country.
investors, trump, tweets, markets
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2018-26-28
Thursday, 28 June 2018 08:26 AM
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