Pay no attention to the president’s company-focused Twitter rants.
That is the advice being given by market experts to investors, notably in Amazon.com Inc.
AMZN, +1.11%
, after President Donald Trump tweeted that he had “concerns” with the online retail giant. This was the latest example of Trump singling out a specific stock for condemnation on Twitter, and while Amazon shares initially fell in response, as has been the trend following such statements, the analysts said the tweets could be safely ignored and shouldn’t be the only factor traded on.
“Trump is way more bark than bite. Eighty percent of what he says never happens, and the other 20% is usually an opening gambit that’s way out of left field,” said Charlie Smith, chief investment officer at Pittsburgh-based Fort Pitt Capital Group.
He admitted that tweets like this “can throw the market for a loop,” but said it was extremely unlikely that the tweet represented an opening salvo in a conflict that would eventually manifest itself as legislation that might meaningfully hurt the company’s business over the long term.
Shares of Amazon fell as much as 4.6% after the microblogging missive, though they subsequently returned to positive territory, closing up 1.1% on the day.
The tweet charged that Amazon isn’t paying its fair share of taxes and that it was hurting the U.S. Postal Service. However, it didn’t give any indication about what steps Trump might take to address the issues he sees with Amazon, or even whether he was planning anything concrete. Doing anything might be difficult, as both of Trump’s allegations are seen as unsubstantiated: the post office makes money off Amazon, and a recent New York Times report indicated that Amazon is “collecting sales tax in every state that has one.” On Wednesday, the White House said it had no specific policies or actions that were being considered against Amazon.
‘Trump is way more bark than bite. Eighty percent of what he says never happens, and the other 20% is usually an opening gambit that’s way out of left field.’
Thursday’s tweet wasn’t the first time Trump has called out Amazon. On Wednesday, the news service Axios reported that the president has wondered aloud if there was any way to “go after” the company, which is run by Jeff Bezos. Bezos also owns the Washington Post, a publication Trump has criticized, and which he has repeatedly referred to as the “Amazon Washington Post.”
Amazon is also not the first company to be singled out by Trump in ways that resulted in a share price drop. Boeing Co.
BA, +2.46%
fell in December 2016—after Trump’s election but before the inauguration—after he threatened to cancel an order with them over Twitter. The president also tweeted negatively about General Motors
GM, +2.45%
, for producing the Chevy Cruz in Mexico; about Lockheed Martin Corp.
LMT, +0.78%
for the price of its F-35 stealth jet fighter; and about Nordstrom Inc.
JWN, +1.06%
, for dumping the fashion label of his daughter Ivanka.
Don’t miss: Trading Trump tweets can leave investors both poorer and sad
Nothing concrete materialized after these tweets and the effect on the stocks proved short lived. In some cases, the stocks shrugged off the tweets in dramatic fashion, sharply outperforming the broader market. Boeing is up more than 80% over the past 12 months, far exceeding the 12% rise of the S&P 500
SPX, +1.38%
over that same period. Lockheed is up 27% over the past year.
Read more: Why the stock market is so quick to recover from the turmoil Trump creates
‘If you’re a short-term trader, then you’ll pay attention to stuff like this. But the longer your investment horizon, the less you should care about this kind of noise. The only question Amazon investors should be asking themselves right now is, do you still think Amazon is a good company?’
“It’s amazing how people fall for this every time,” said JJ Kinahan, chief market strategist at TD Ameritrade, referring to the post-tweet drop in Amazon’s stock. “One thing that gets lost is how he comes out with a big statement, people get riled up, and then he does something more pragmatic or nothing happens at all.”
The strategist said a similar trend was seen in a recent Trump announcement about steel and aluminum tariffs—an issue that was seen as having a more concrete influence on corporate profits. While Trump’s initial comments indicated a hard-line approach, Treasury Secretary Steven Mnuchin subsequently suggested any tariffs might not apply to Canada or Mexico.
“The mistake a lot of investors make is that they don’t know what time frame they want to hold a stock for,” Kinahan said. “If you’re a short-term trader, then you’ll pay attention to stuff like this. But the longer your investment horizon, the less you should care about this kind of noise. The only question Amazon investors should be asking themselves right now is, do you still think Amazon is a good company?”
Source : MTV
