The stock market is experiencing a significant downturn, which researchers attribute to the actions and statements of former President Donald Trump. The phenomenon dubbed as the “Trump Dump” effect, has been linked to the former president’s public criticisms of specific companies and sectors.
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What Happened: In an op-ed for Fortune, a group of researchers, including Jeffrey Sonnenfeld, Whitney Tilson, and Steven Tian, have identified a pattern of stock market declines following Trump’s public criticisms.
“Former President Donald Trump has long regarded the stock market as a barometer for his success, constantly touting record highs during his time in office and still bragging constantly about the ‘beautiful’ stock market on his watch,” the researchers wrote.
“However, what many commentators miss is not just the 40 record highs the stock market has hit under the Biden-Harris administration—but also that while Trump does hold significant sway over pockets of the stock market, much of his impact is profoundly negative, particularly for individual companies and industries that draw his ire.”
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The ex-president recently triggered a sharp sell-off in the chip sector after he accused Taiwan of usurping the US’s chip business and proposed they should finance U.S. military protection.
Following Trump’s remarks, Taiwan Semiconductor (NYSE:TSM) witnessed a 17% plunge from mid-July levels. The tech sector also saw a wider sell-off, with the Nasdaq Composite declining around 10% in the days succeeding the interview.
This is not the first time Trump’s comments have impacted the market. During his first term, Trump’s remarks led to a drop in Harley-Davidson shares and Delta Airlines stock. The S&P 500 also showed a tendency to decline on days when Trump mentioned “tariff,” “Fed,” or “Powell.”
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The researchers also suggested that Trump’s criticisms of renewable energy companies could be adversely affecting their performance. The iShares Global Clean Energy ETF (NASDAQ:ICLN) has declined 10% since the beginning of the year.
Why It Matters: The “Trump Dump” phenomenon has been a recurring theme in the stock market. Trump’s influence on specific sectors and companies has been consistently negative, according to the researchers. They also warned that a potential 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,” which suggests that Trump’s victory in the upcoming election could lead to gains in sectors like real estate, traditional energy, financials, and industrials. However, the researchers noted that gains in these areas have been mostly temporary, often reversing themselves several weeks after the first presidential debate.
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Meanwhile, Goldman Sachs analysts suggested that a Trump victory in the 2024 election could boost the stock market, particularly in sectors like real estate, traditional energy, financials, and industrials. However, they also noted that not all sectors would benefit equally from a Trump win.
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 trigger global inflation, particularly due to his “America-first” policies. Additionally, there are concerns that Trump’s fiscal policies could weaken the dollar’s dominance as the world’s primary reserve currency.
Trump, at the National Association of Black Journalists conference in Chicago, said “Elon Musk endorsed me and he is a friend of mine, ... but I am against everybody having an electric car.”
Top analyst Dan Ives has also predicted that "a Trump presidency would be an overall negative for the EV industry as likely the EV rebates/tax incentives get pulled, however for Tesla we see this as a potential positive.”
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This article Researchers Identify 'Trump Dump' Effect: Ex-President Is Already Causing Deep Stock Losses In Companies And Industries He Targets originally appeared on Benzinga.com