Traders at JPMorgan Chase & Co. have not displayed much confidence in the words of United States President Donald Trump in recent days.
New fears surrounding a deepening trade war with China precipitated a three percent drop in the major stock indexes earlier in the week. The drop came just a few days after Trump attended a dinner with Xi Jinping, the Chinese president. In a tweet that followed the dinner, Trump promised current relations between the United States and China took a “BIG leap” forward.
JPMorgan issued a statement to clients later the same day expressing a belief that not much had been accomplished at the dinner with the Chinese president. JPMorgan went on to say the president’s comments were at the least an exaggeration.
The mistrust demonstrated by JPMorgan is symptomatic of a much bigger problem for investors on Wall Street. Investors are simply unsure of how seriously they can take any comment made by President Trump.
Traders are familiar with the fact that many of the president’s bold pronouncements do not hold weight. However, statements by officials in Washington have increased the volatility of the market in 2018 in such a way it makes the president’s comments difficult to ignore.
Wall Street insider Maria Vassalou says it is a total judgment call as to which of the announcements by the president can be viewed seriously. She says this condition creates increased volatility and causes the investment process to become more complicated.
Trump is not the only White House official making comments that are indecipherable by traders. Secretary of Treasury Steven Mnuchin and Larry Kudlow, economic advisor, have also caused uncertainty among investors with their words.
Mnuchin made comments in January explaining that a weaker dollar is good for the economy. The comments occurred at the World Economic Forum and caused the dollar to drop to a low that hadn’t been seen for three years.
Kudlow told reporters in April that the U.S. tariffs against industrial products from China may never become effective. The stock market experienced a rise after the words of Kudlow. Another White House official admitted later the comments were made to bolster the confidence of investors.
However, the very next day Trump instructed trade officials to consider more tariffs on China. The instructions caused equity futures to decline sharply.
The current business and political climates have caused savvy investors to search for creative ways to guard against volatility caused by the White House.