NEW YORK (Reuters) – JPMorgan Chase & Co & # 39; s (JPM.N) the trading desk was not buying what US President Donald Trump was selling this week.
PHOTO FILE: The specialized dealer Meric Greenbaum works in his place on the floor of the New York Stock Exchange (NYSE) in New York, United States, May 17, 2017. REUTERS / Brendan McDermid
On Tuesday, the leading stock indices plummeted more than 3% on renewed fears of a trade war with China – just days after Trump tweeted, after a staple dinner with Chinese President Xi Jinping, that " with China they made a big leap forward! "
"It does not look like anything was actually accepted at the dinner," JPMorgan wrote in a note to customers later that day, adding that Trump's tweets "look like they're not completely invented and then grossly exaggerated."
The distrust in the bank's trading desk highlights a wider dilemma for Wall Street investors: how seriously to take comments from the White House.
On the one hand, traders have long known that President Trump's bold statements do not always hold up, ultimately, changing their effect on the headlines. On the other hand, market volatility resumed in 2018, partly due to confusion over Washington officials' comments, making them harder to ignore.
"It is a judgment on which ads should be taken seriously," said Maria Vassalou, portfolio manager for the $ 685 million global strategy for Perella Weinberg Partners.
"This situation certainly creates unnecessary volatility and complications in the investment process".
Trump says that relations with China have brought "a great leap forward" – tmsnrt.rs/2QdIfjz
Trump says he is "a man of the rates" – tmsnrt.rs/2Qgrg00
It is not just Trump. Unexpected comments from White House officials, such as Treasury Secretary Steven Mnuchin and financial adviser Larry Kudlow, have caused a stir among operators. Every man has been quoted by Reuters as the engine of the market moves more than two dozen times.
Mnuchin sent the US dollar to a minimum of three years at the end of January, after comments at the World Economic Forum in Davos suggesting that a weaker currency was "good for us". Within a few hours, Trump seemed to contradict him, saying that he eventually wanted a strong dollar, raising the greenback. (Graph: tmsnrt.rs/2RIZ1Uo)
Steve Mnuchin awaits the stock market reaction – tmsnrt.rs/2RBiV3X
GRAPHIC: Trump and Mnuchin comment on whipsaw U.S. dollar tmsnrt.rs/2RIZ1Uo
As for Kudlow, on April 4 he told reporters that it was possible that US tariffs on Chinese industrial products never came into force and could simply be a negotiating tactic. The shares rose after the remarks, which later an unnamed White House official told Reuters they were meant to reassure the markets.
Yet equity futures fell the day after Trump declared in a statement that he had instructed US officials to consider tariffs for an additional $ 100 billion of imports from China to punish them for retaliation against previously announced rates .
GRAPHIC: S & P 500 moves while Kudlow, Bannon and Trump weigh on commercial wars – tmsnrt.rs/2RA9AsX
Some investors have taken the protection from the volatility fueled by the White House in their hands.
Juan Gomez, head of the hedge fund company Black Swan Quantitative Advisors, which manages $ 75 million in assets, said it has adjusted its options-focused models over the past two years to incorporate more protection against market volatility, in part in response to Trump administration comments.
"At this point you expect controversial titles," said Gomez. "At the beginning, it drove me crazy, but now it's just a part of what to expect."
Katina Stefanova, head of Marto Capital LP, which manages about $ 300 million, said her hedge fund company has created a "Trumponomics" index of securities to help cover the broader portfolio.
Stefanova said that the profit of his fund this year, equal to about 7% in 2018 until November, would be less than about two percentage points without the index, which recently focused on the impact of the wars. US companies, such as Chinese technology stocks, American industrial companies and Asian currencies.
"You still have to take the White House seriously," Stefanova said. "The inconsistency itself fluctuates markets and influences sentiment".
Other investors simply try to look beyond the White House titles.
Daniel Lowen, president of Quantedge Capital USA Inc, said his $ 1.5 billion hedge fund algorithms do not try to anticipate market movements from Trump's management statements. "We make no attempt to interpret what we read in the news as input for our investment decisions," Lowen said.
The head of a multi-billion dollar hedge fund manager, who requested anonymity to speak with the media, said Trump's comments are "impossible to ignore", but the company avoids reactive trading even if it can hurt in the short term. "We are looking for and effectively isolate our gains from market risk," he said.
Whatever the reaction, professional investors have said that the effect of the White House on the markets is difficult to avoid. The securities are virtually certain to continue to transfer statements relating to US trade policy, changes in interest rates and other economic issues. The CBOE Volatility Index, or VIX .VIX, a common measure of fear perceived in the markets, has increased by almost 90 percent this year.
"Maybe some people are good at parsing their words and figuring out what it is, but this is very difficult," said Fritz Folts, chief investment strategist, 3EDGE Asset Management LP, which controls about $ 800 million. "You have to look at what they do and not what they say."
Reporting by Lawrence Delevingne and Trevor Hunnicutt; Additional services by Lewis Krauskopf and Dan Burns in New York; Editing by Neal Templin and Lisa Shumaker