Do Trump's words/speeches affect the markets?

As a recent example, after Trump's speech about the Charlottesville riots, news exploded about the negative impact it would have on the markets. Why is it when Trump talks about things seemingly unrelated to finance, the markets still react?

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August 2017

Hi!  Thank you for writing.  Great thoughts from our other advisors!  I’d like to add to them. Your point is excellent – President Trump’s tweets and speeches that seem unrelated to the stock market do affect it. However, many other “unrelated” words, actions, and events also seem to disproportionately affect market movements. While our economy is certainly affected by concrete economic news, it’s also affected by many other less concrete actions and also by perceptions and often unfounded worries. An analogy, for those of you who have teenage daughters, might be a minor comment from a girlfriend to your daughter that in reality has no significance or meaning but sets off a torrent of tears, upset, and drama far out of proportion to the actual comment. In time, things even out, but what a ride while you are waiting out the storm!

The stock market is acted on by human investors with feelings and worries who are affected by emotion and not always governed by impartial facts. That makes it susceptible to all sorts of “unrelated” factors – also called “noise.” As our other advisors have written, following a long-term investing plan with good diversification and trying not to listen to the noise can help.  Please write to us again if we can help!

August 2017
August 2017
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August 2017