Let's Talk About…Why Tweets Can Move Markets

Published on: Jun 23, 2021fb-roundtwitter-roundemail-round
How Tweets Can Move Markets Design: ML Howell, Credit: iStock

The Story

Business leaders, politicians, celebs, and other VIPs can influence financial markets with a single tweet. And that can affect your money. Even if you don't get caught up in the buzz yourself.

Who are you talking about?

Keith Gill, aka "Roaring Kitty" on social media, gets a lot of credit for making GameStop and the meme stock frenzy happen with lots of tweets, YouTube videos, and, of course, Reddit posts about his investment. But way before that, in 2013, billionaire Carl Icahn – one of Wall Street's most successful investors – sent Apple's stock soaring more than $17 billion one day. He did it with two tweets about how much of it he owns (hint: it was a LOT) and some bonus advice for CEO Tim Cook. And former President Donald Trump's tweets also often set off huge short-term market reactions. Because as commander in chief, his hot takes packed plenty of actual fire power.

Aaand then there's Tesla CEO Elon Musk, who's been extra busy in this department. In 2018, he tweeted about having "funding secured" to take Tesla private. Spoiler: he didn't. And the claim landed him in hot water with the SEC for making false and misleading statements that sent the company's stock on a rollercoaster ride. 

But his tweets have kept on coming. In January, GameStop’s price shot up after Musk added his two cents to the GameStop saga with a one-(made-up-)word tweet: “Gamestonk!!” Most recently, he's been moving the cryptocurrency market. Dubbing himself the "Dogefather" helped Dogecoin surge. And his tweet breaking up with Bitcoin over its environmental impact sank the digital currency's price.

Why do one person's tweets make that big a difference?

Economic factors (read: inflation, interest rates, unemployment) often drive market fluctuations. But so do feelings, like hope or uncertainty about the future. And influential people tweeting info that could impact company profits and stock prices can toy with investors' emotions and send ripples through the market.

And that's legal?

At least for now. Laws are lagging technology, and regulators aren't sure how to handle stock talk on social media. But they've been discussing updating the rule book.

It seems like the stock market's one big game.

It can feel that way. Especially lately when investments (think: stocks and crypto) have been a lot more volatile. That's in part thanks to social media platforms like Twitter and Reddit making it easier for individual investors to coordinate their moves. And thanks to investment apps like Robinhood making it easier for them to trade.

What should I do with my money when these tweets happen?

Seeing a big swing in your investment account balance is nerve-wracking...no matter why it happened. Here's what to do next.

  • Try to ignore the hype. If you're investing for the long term, like for retirement, don't worry about the daily ups and downs.

  • Diversify your portfolio. Spreading your money across many different investments boosts the odds that you're holding at least some winners most of the time. That means having a mix of various stocks and bonds. And a mix of investments within asset classes – like stocks from different companies or industries. 

  • Keep it boring. Dabbling in meme stocks, crypto, and other investing manias could be a fun(-sized) part of your portfolio. But banking your retirement on the opinions of a few high-profile Twitter accounts may not be the smartest move. "Boring" investments like index funds have a tried-and-true record of growing consistently over time.

theSkimm

A single tweet has the power to influence markets. But you're in control of your own portfolio. If you're investing for the long term, stay focused and ignore the noise to help ensure you reach your financial goals.

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Skimm'd by Casey Bond, Ivana Pino, Stacy Rapacon, and Elyse Steinhaus