Trump’s Second Term: A Trader’s Guide to Market Volatility, Truth Social, and Policy Shocks

As Donald Trump returns to the presidency, traders are once again assessing how his social media activity—especially on Truth Social—could impact financial markets. The previous administration provided numerous instances where Trump’s tweets moved stocks, currencies, and bonds, and the research provided in three academic studies suggests we are likely to see similar effects in the next four years.

Social Media and Market Volatility

A study by Filippou, Gozluklu, Nguyen & Viswanath-Natraj (2021) examined the impact of Trump’s tweets on the FX market, showing that his statements about trade policy, tariffs, and the Federal Reserve led to significant exchange rate fluctuations. The study identified sharp reactions in USD, EUR, GBP, and CNH following Trump’s market-sensitive posts.

Additionally, Filippou, Gozluklu & Taylor (2018) found that political momentum influenced currency momentum strategies, reinforcing the idea that Trump's influence extends beyond immediate price swings to long-term currency trends.

For traders, this means keeping a close eye on Trump’s posts about economic policy, as these could once again drive short-term swings in FX markets and broader investor sentiment.

Company-Specific Reactions

Another key aspect of Trump’s social media impact on markets was how his posts influenced individual companies' stock prices. A study titled The Effect of President Trump’s Company-Specific Tweets on Companies confirmed that Trump’s public statements directly affected stock performance, leading to abnormal returns and increased trading volume on select stocks.

For instance, when Trump criticized or endorsed companies on Twitter, market participants reacted swiftly, causing spikes in volatility and short-term momentum trading opportunities. With his return to power and Truth Social as his primary platform, traders should expect similar movements—especially in industries he frequently engages with, such as tech, manufacturing, and defense.

Federal Reserve and Market Uncertainty

During his first term, Trump frequently criticized the Federal Reserve’s interest rate policy. According to research by Filippou, Gozluklu, Nguyen & Viswanath-Natraj (2021), such criticisms impacted interest rate expectations and, in turn, bond markets.

Although the new administration may take a different approach, any negative commentary on the Fed or rate decisions from Trump could create market turbulence, affecting bonds, equities, and even safe-haven assets like gold. Given the potential for political pressure on monetary policy, traders should remain vigilant for any posts that may hint at Fed policy influence.

Safe Havens and Hedging Strategies

As uncertainty rises, gold and other safe-haven assets tend to experience inflows. Filippou et al. (2021) noted that Trump’s more controversial statements led to increased demand for defensive assets, especially during geopolitical tensions. Traders should monitor gold and the US dollar closely in response to Trump’s foreign policy announcements, which have historically influenced capital flows into perceived safe assets.

Trading in the Age of Truth Social

Unlike his first term, Trump now has Truth Social as his primary platform, where he can post without moderation. This shift could make market reactions even less predictable than during his Twitter years. Because these posts will not carry the same media amplification as Twitter, their direct impact on markets may differ. However, for traders, it will be crucial to track viral trends on Truth Social and how mainstream news outlets interpret them.

Key Takeaways for Traders

Expect high FX market sensitivity—especially to posts about trade policy, tariffs, and the Fed (Filippou et al., 2021).

Watch for individual stock movements when Trump mentions companies on Truth Social (Company-Specific Tweets study).

Fed-related tweets could drive interest rate volatility, affecting bonds and equities (Filippou et al., 2021).

Gold and other safe-haven assets may benefit from uncertainty around Trump’s economic policies and geopolitical tensions.

Tracking Truth Social trends will be essential, as Trump’s posts may move markets even without Twitter’s amplification.

Final Thought: How to Trade the Next Four Years

Trump’s presidency is historically unique in that his personal statements can cause immediate market reactions. Traders should be prepared for sudden spikes in volatility, with algorithmic trading and news-sensitive strategies playing an even greater role. By closely following economic policy updates, company-specific mentions, and Truth Social trends, investors can position themselves to capitalize on the opportunities and risks ahead.

With a new political landscape and a familiar market disruptor, the next four years will be anything but predictable. Stay informed, stay agile, and always be ready for the unexpected EDGE.