Visually, the graph suggests that the trend of the stock market and Trump’s tweets seem to move together. When running a correlation between the two series, the positive correlation of 0.63 implies that Trump’s tweets do in fact move with the stock market. However, importantly, correlation does not imply causation. In other words, we have no indication of the direction of the relationship. There are also various individual factors that may affect stock returns such as interest rates, inflation expectations and other unconsidered factors. The interpretation of the relationship we have found is more likely that the tweets coincide with market-moving events such as a surprising economic data release or a monetary policy decision, after markets have reacted to the data. Therefore, we cannot say that with 100% confidence that Trump’s tweets preemptively affect the stock market. However, it is highly likely that the sentiment of the tweets correlates positively with market returns.
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