The Trump effect: How mortgage rates move with the president's tweets
President Trump lets his thoughts be known through Twitter and those tweets can have a direct impact on the economy and interest rates, according to Clever Real Estate.
The president averages nine tweets per day and sent over 13,000 during his time in office. Often, those tweets get aimed at government organizations and they have economic ripple effects. When he criticizes the Federal Reserve in a tweet, the S&P 500 closes 43 points higher on average.
On the flip side, 10-year Treasury yields close an average of 0.13 points lower with each additional tweet about the Fed. Since 15- and 30-year fixed mortgage rates are tethered to 10-year Treasury yields, they would normally drop alongside them as well.
The National Bureau of Economic Research verified this correlation with its own study conducted in September. NBER also said that after the Great Inflation of the 1970s, the "enhanced autonomy for instrument setting allowed the Fed to aggressively target and stabilize inflation in the ensuing three decades." While the president's open public criticisms may help mortgage rates fall, the volatility and impediment on the Fed's sovereignty could hurt its credibility, and in turn, the economy.
"These dynamic effects indicate that the tweets do not simply affect expectations about the timing of changes that markets were already anticipating, but instead move market expectations about the stance of monetary policy," NBER said in its report.
Clever gathered and analyzed Trump's tweets from Nov. 1, 2016 to Nov. 24, 2019. A linear regression model was then used to draw the relationships between the daily close values of stocks and Treasury yields and tweet frequencies and sentiments.