NEW YORK (Reuters) – JPMorgan Chase & Cos ( JPM.N ) Trade Board did not buy US President Donald Trump sold this week.
PHILPHOTO: Specialist Meric Greenbaum works on his floor on the New York Stock Exchange (NYSE) in New York, USA, May 17, 201[ads1]7. REUTERS / Brendan McDermid
On Tuesday, major stock indices plummeted more than 3 percent on renewed fear of a trade crisis with China – just days after Trump tweeted, after a steak dinner with Chinese President Xi Jinping, that "Relationship to China has taken a big step forward!"
"It does not seem like something was actually agreed at dinner, JPMorgan wrote in a note to clients later that day, adding that Trumps tweets" works if they are not completely factory, so grossly exaggerated. "
The bankruptcy of the bank's trading disc highlights a broader dilemma for Wall Street investors: How seriously to take comments from the White House.
On the one hand, traders have long known that President Trump's bold statements do not always last, and in the past instances curb their effect on securities. On the other hand, volatility in the market has increased in 2018, partly due to confusion over comments from Washington officials, making them more difficult to ignore.
"It's an assessment of what messages which will be taken seriously, "said Maria Vassalou, portfolio manager for Perella Weinberg Partners $ 685 million global macro strategy.
Trump says relations with China took" BIG leap forward "- tmsn rt.rs/2QdIfjz
Trump says he is "a taxman" – tmsnrtrsrs / 2Qgrg00
It's not just Trump. Unexpected comments from White House officials like State Secretary Steven Mnuchin and Economic Advisor Larry Kudlow have caused touch with traders. Each man was quoted by Reuters as a driver of the market moving more than two dozen times.
Mnuchin sent US dollars to a three-year low at the end of January after commenting at the World Economic Forum in Davos, indicating that a weaker currency was "good for us". Over hours, Trump seemed to oppose him, saying that he eventually wanted a strong dollar, lifting the greenback. [Graphics: tmsnrtrsrs / 2RIZ1Uo]
Steve Mnuchin Awaits Stock Market Response – TMSnrtrsrs / 2RBiV3X
GRAPHICS: Trump and Mnuchin Comments Whipsaw US Dollars TMSnrtrsrs / 2RIZ1Uo
As for Kudlow, April 4, he told reporters that US tariffs on Chinese industrial products might never come into force and may just be a negotiation strategy. Stocks rose after the comments, as an unnamed white house officially later told Reuters was meant to reassure the markets.
However, capital futures fell the next day after Trump said in a statement that he had instructed US trade representatives to assess tariffs of an additional $ 100 billion from imports from China to punish them to oppose previously announced tariffs.
GRAPHICS: S & P 500 Moves Like Kudlow, Bannon and Trump Weighing Into Trade War – TMSnrtrsrsRA9AsX
Some investors have taken protection against White House fuel volatility in their own hands.
Juan Gomez, head of the Black Swan Quantitative Advisors, which manages $ 75 million in assets, said he has adjusted his option-focused models over the past two years to incorporate more protection against market volatility, in part in response to Trump administration comments .
"At this point you expect controversial headlines," said Gomez. "In the beginning, I was mad, but now it's just a part of what to expect."
Katina Stefanova, head of Marto Capital LP, which manages about $ 300 million, said the hedge fund had created a "Trumponomics" index of securities to ensure hedging of the broader portfolio.
Stefanova said that the fund's profit this year – up 7 percent in 2018 to November – would be around two percentage points lower without the index, which recently focused on effects of US trade wages, such as Chinese technology stocks, US industrial companies and Asian currencies .
"You still have to take the White House very seriously," Stefanova said. "The inconsistency itself fluctuates markets and affects emotions."
Other investors just try to look past White House headlines.
Daniel Lowen, head of Quantedge Capital USA Inc, said that his about $ 1.5 billion hedge fund bank algorithms did not attempt to predict market movements from Trump's management statements. "We make no attempt to interpret what we read in the news as input to our investment decisions," said Lowen.
Head of a multi-billion dollar hedge fund manager asking for anonymity to talk to the media said that Trump's comments are "impossible to ignore", but the company avoids reactive trade even if it may hurt in the short term . "We are trying to actually isolate the return from market risk," said the person.
Regardless of the reaction, professional investors said that the white house's impact on markets is difficult to avoid. Securities are virtually safe to keep moving on statements related to US trade policy, interest rate changes and other financial issues. CBOE Volatility Index, or VIX. VIX, a common target for perceived fear in the markets, is up almost 90 percent this year.
"Maybe some people are good at analyzing their words and finding out what's, but it's very hard," said Fritz Folts, the main investment strategy, 3EDGE Asset Management LP, which monitors about $ 800 million. "You have to look at what they are doing and not what they say."
Reporting by Lawrence Delevingne and Trevor Hunnicutt; Further reporting by Lewis Krauskopf and Dan Burns in New York; Editing Neal Templin and Lisa Shumaker