Key Takeaways
- • Quantitative strategists at major hedge funds and banks are largely dismissing Donald Trump's tweets as a tradable signal, citing insufficient historical data and sporadic timing.
- • Harmonic Capital Partners, a $1.7 billion systematic macro fund, says Trump's tweets are a good opportunity for short-term discretionary traders but not for quant managers who need five to 10 years of data.
- • Nomura's Joseph Mezrich calls Trump's tweets "episodic" and says one or two Twitter events do not provide reliable statistical evidence.
- • Robinhood reported record transaction volumes above $1 billion in the week after Trump's election victory, while TD Ameritrade's fiscal first-quarter average daily trading volume rose 11% year over year, partly attributed to Trump.
- • Algorithmic trading accounts for about 55% of U.S. equity trading volume according to Greenwich Associates, and 65-70% of global currency trading according to Aite Group.
Summary
Some of the most prominent quantitative strategists at hedge funds and banks are not ready to trade on President Donald Trump's tweets, according to Fortune, even as day traders embrace them. Trump's active Twitter presence has increased volatility in financial markets, which benefits short-term traders in highly liquid markets. Such traders have struggled in recent years as market moves became steadier and more predictable in a low interest-rate environment.
Patrik Safvenblad, a partner at the $1.7 billion systematic macro hedge fund Harmonic Capital Partners in London, said Trump's tweets are a good opportunity for short-term discretionary traders. However, he said the strategy does not suit his firm, because quantitative managers need data spanning at least five to 10 years to establish a pattern. Quants build formulas from historical trading behavior and asset prices, which feed algorithms that trade automatically. Joseph Mezrich, head of equities quantitative strategies at Nomura in New York, described the tweets as "episodic" and said that a handful of Twitter events does not provide statistically reliable evidence.
First Quadrant, a computer-model asset manager with about $22 billion in assets, is also not trading on the tweets. Partner Jeppe Ladekarl said the firm is focused on fundamental change. Richard Benson, co-head of portfolio management at Millennium Global, which manages about $16 billion, believes the tweets have created more noise than meaningful volatility. He said they may offer short-term sentiment signals about specific companies, but that the messages remain open to interpretation and may not be predictive. Millennium has no plans to use the tweets in its systematic fund.
The response is different among retail-focused platforms. Robinhood, a commission-free trading app with 1 million users, said its volumes hit record levels of more than $1 billion in the week after Trump's victory and have surged with his Twitter activity, according to a company spokesman. FXCM, a U.S. retail currency broker, reported higher volume in November, partly due to the election, and said Trump's comments on Mexico and China had boosted dollar trading over the prior two months. TD Ameritrade reported fiscal first-quarter average daily trading volume up 11% from a year earlier, partly attributed to Trump. CEO Tim Hockey said on an earnings call that the president's social media activity could continue to drive volume.
According to Greenwich Associates, algorithmic trading accounts for about 55% of U.S. equity volume, and Aite Group puts the figure at 65-70% in the global currency market. Analysts expect policy uncertainty under the new administration to keep price swings going despite the quants' limited engagement with the tweets.
Patrik Safvenblad, a partner at the $1.7 billion systematic macro hedge fund Harmonic Capital Partners in London, said Trump's tweets are a good opportunity for short-term discretionary traders. However, he said the strategy does not suit his firm, because quantitative managers need data spanning at least five to 10 years to establish a pattern. Quants build formulas from historical trading behavior and asset prices, which feed algorithms that trade automatically. Joseph Mezrich, head of equities quantitative strategies at Nomura in New York, described the tweets as "episodic" and said that a handful of Twitter events does not provide statistically reliable evidence.
First Quadrant, a computer-model asset manager with about $22 billion in assets, is also not trading on the tweets. Partner Jeppe Ladekarl said the firm is focused on fundamental change. Richard Benson, co-head of portfolio management at Millennium Global, which manages about $16 billion, believes the tweets have created more noise than meaningful volatility. He said they may offer short-term sentiment signals about specific companies, but that the messages remain open to interpretation and may not be predictive. Millennium has no plans to use the tweets in its systematic fund.
The response is different among retail-focused platforms. Robinhood, a commission-free trading app with 1 million users, said its volumes hit record levels of more than $1 billion in the week after Trump's victory and have surged with his Twitter activity, according to a company spokesman. FXCM, a U.S. retail currency broker, reported higher volume in November, partly due to the election, and said Trump's comments on Mexico and China had boosted dollar trading over the prior two months. TD Ameritrade reported fiscal first-quarter average daily trading volume up 11% from a year earlier, partly attributed to Trump. CEO Tim Hockey said on an earnings call that the president's social media activity could continue to drive volume.
According to Greenwich Associates, algorithmic trading accounts for about 55% of U.S. equity volume, and Aite Group puts the figure at 65-70% in the global currency market. Analysts expect policy uncertainty under the new administration to keep price swings going despite the quants' limited engagement with the tweets.
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