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Fred Dunkley

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Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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Markets Hit ‘Ignore’ Over Capitol Coup

Markets Hit ‘Ignore’ Over Capitol Coup

If you don’t live in Washington, D.C., and aren’t glued to social media in an entirely vicarious lifestyle, or seek all your validation from a chat forum, then in all likelihood, you watched the attempted “palace” coup Wednesday and Thursday as if it were simply reality TV, and went about your day. That’s pretty much what the stock market has done. It has blinked, and hasn’t missed a beat. Nor has bitcoin. 

It’s a fascinating turn of events, considering that talking heads have sounded alarm bells for market crashes for much smaller deeds--and developments much farther from home. 

But not this time. Perhaps the market is simply tired of domestic political antics and no longer takes them seriously. 

That’s not how it’s been in the recent past, though. For the past four years, the stock market very closely watched Donald Trump’s tweets, statements, public announcements….and acted on them, for wrong or right.  

Now, investors are suddenly ignoring everything, including Trump’s erratic tweets. 

Wednesday’s scenes at the Capitol Hill as a pro-Trump riot breached The Capitol should have seen investors running for the hills.

Normally, such protests would cause the stock market to nose-dive short-term; but the Dow closed up 437 points, or 1.44%, to 30,829, and the S&P 500 gained 0.57% to 3,748. 

Both the Dow and S&P 500 reached record intraday highs following Congress' confirmation of Joe Biden's presidential election win.

Last year, Trump warned that the U.S. stock market would crash if he lost the election. 

Elections were held and he lost, but Wall Street’s reaction has been pretty positive, with markets nowhere near tanking.

On the contrary, thanks to the coronavirus vaccine breakthrough, the S&P 500 notched its best election week rally since 1932. Dow soared nearly 12% in November, its best month since January 1987. 

According to the annual list assembled by Wired magazine published in December, Trump is still the most dangerous man on the internet. It’s a title he carries for the sixth year in a row. And while he may no longer be immediately dangerous to stock markets, he has used his power to reach out to more fringe groups to stir things up. 

With more than a decade on social media, 36 tweets a day, and over 80 million followers on Twitter, the damage Trump has inflicted with social media alone will resonate through history. It’s a legacy, of sorts. 

“As his presidential term comes to an end, he remains the world's single most powerful source of disinformation and the internet's most toxic cyberbully,” Wired says. The list is followed by Facebook’s Mark Zuckerberg and a handful of hackers and extremist groups.

As for Trump, according to a Bank of America Merrill Lynch report from last year, the days when he tweets a lot are associated with negative stock market returns. 

The brokerage wrote in a note last September that “since 2016, days with more than 35 tweets (90 percentile) by Trump have seen negative returns (-9bp), whereas days with less than 5 tweets (10 percentile) have seen positive returns (+5bp) — statistically significant.” 

Chief equity strategist, Savita Subramanian, wrote that the trade talk, political campaigning and tweets have contributed to volatility, from China to Fed policy to tax policy.

Even in the early stages of Trump’s presidency, one Chicago company developed a program that uses computer algorithms that instantly capture Trump’s Twitter remarks and then immediately bought or sold the affected stocks. 

Social Market Analytics said it compiles tweets that could affect stocks, and then passes that data along to traders. 

That may come to an end abruptly. 

Twitter says it has locked Trump’s account for 12 hours, and warned for the first time that it may suspend him permanently after his supporters stormed the Capitol building to protest the election.

Facebook officially suspended Trump's account through at least January 21, if not longer. Facebook, Twitter, and YouTube all deleted a video statement and other messages from Trump. 

By Fred Dunkley for Safehaven.com

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