The stock market is experiencing a significant downturn, which researchers attribute to the former president’s actions and statements Donald Trump. The phenomenon known as the “Trump Dump” effect, has been linked to the former president’s public criticism of specific companies and sectors.
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What happened: In a op-ed For Fortune, a group of researchers including Jeffrey Sonnenfeld, Whitney Tilson and Steven Tian identified a pattern of stock market declines following Trump’s public criticism.
“Former President Donald Trump has long viewed the stock market as a barometer of his success, consistently touting record highs during his time in office and still constantly bragging about the ‘beautiful’ stock market under his watch,” the researchers wrote.
“What many commentators are missing, however, is not only the 40 record highs the stock market has reached under the Biden-Harris administration – but also that while Trump has significant influence over parts of the stock market, much of his impact is profoundly negative . especially for individual companies and industries that draw his ire.”
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The ex-president recently sparked a sharp sell-off in the chip sector after he accused Taiwan of usurping the US chip business and suggested they should fund US military protection.
Following Trump’s comments Taiwanese semiconductor (NYSE:TSM) witnessed a 17% decline from mid-July levels. The technology sector also saw a broader sell-off, with the Nasdaq Composite falling about 10% in the days after the interview.
This isn’t the first time Trump’s comments have impacted the market. During his first term, Trump’s comments led to a decline in Harley-Davidson and Delta Airlines shares. The S&P 500 also tended to fall on days when Trump mentioned “tariff,” “Fed” or “Powell.”
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The researchers also suggested that Trump’s criticism of renewable energy companies could negatively impact their performance. The iShares Global Clean Energy ETF (NASDAQ:ICLN) is down 10% since the beginning of the year.
Why it matters: The ‘Trump Dump’ phenomenon is a recurring theme in the stock market. According to the researchers, Trump’s influence on specific sectors and companies has consistently been negative. They also warned that a possible second term for Trump could further destabilize the stock market, citing the potential consequences of his economic policies.
Despite the “Trump Dump,” some argue for the existence of the “Trump trade,” suggesting that Trump’s victory in the upcoming election could lead to gains in sectors such as real estate, traditional energy, financial services and industrials. However, the researchers noted that gains in these areas were usually temporary and often reversed several weeks after the first presidential debate.
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In the meantime, Goldman Sachs Analysts suggested a Trump victory in the 2024 election could boost the stock market, especially in sectors such as real estate, traditional energy, financial services and industry. However, they also noted that not all sectors would benefit equally from a Trump victory.
There are also concerns about the potential impact of Trump’s economic policies on the global economy. Analysts have warned that a second term for Trump could be possible cause global inflation, especially because of his “America-first” policies. Moreover, there are concerns that Trump’s fiscal policies could affect this weaken the dominance of the dollar as the world’s leading reserve currency.
Trump said at the National Association of Black Journalists conference in Chicago: “Elon Musk supported me and he’s a friend of mine, … but I’m against everyone having an electric car.”
Top analyst Then Ives has also predicted that “a Trump presidency will be a… generally negative for the EV industry It is likely that the EV rebates/tax benefits will be eliminated, but for Tesla we see this as a potential positive.”
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This article Researchers identify the ‘Trump Dump’ effect: ex-president is already causing major stock losses in companies and sectors he targets originally appeared on Benzinga.com