The Trump Trade:

Is there a “Trump Sabbath-Effect”?

- Equity markets have risen since President Trump’s inauguration.

- However, controversial events causing temporary market downturns have occurred during Sabbath hours, when Ivanka Trump and Jared Kushner are absent

- Is a tradeable pattern developing?

Regardless of views on a Trump presidency, few investors would have expected their best trade could be betting on calm markets. Nevertheless, since President Trump was inaugurated on January 20th, equity markets have risen by 4.58%, and the CBOE Volatility Index (the “VIX”) has fallen by 0.78% While the fall in the level of the VIX may suggest a period of relative calm, the administration’s first few weeks could hardly be described as “boring.” President Trump’s controversial travel ban on citizens of seven Muslim-majority nations, together with his subsequent criticism of a “so-called judge” blocking its enforcement, his attacks on media and the National Parks Service regarding the size of his inauguration, and his recent allegations that then-President Obama ordered a McCarthyesque wiretap of Trump Tower,have all been met less than enthusiastically in certain circles, and in each case equity markets opened lower immediately after these events. Investors often look for common elements to explain market-moving events. What is perhaps striking about the aforementioned events is that each and everyone took place over the weekend, specifically on Friday evening or Saturday morning.

Shortly after inauguration, Vanity Fair observed this, noting that some of the administration’s most controversial moments had occurred between sunset on Friday and sunset on Saturday, the period observed by Jews and by some Christians as the Sabbath. Coincidence? Possibly not. The article went on to suggest that President Trump’s daughter, Ivanka Trump, and son-in-law turned advisor, Jared Kushner’s Sabbath observance may be behind this anomaly. How so?

Ms.Trump and Mr. Kushner, generally viewed as a moderating influence on the President, are observant Orthodox Jews. As such, from sunset on Friday to sunset on Saturday, they rest from their work. Per their observance, in fact, they refrain from the use of technology such as telephones and would have been unable to attend the President’s inauguration celebration by car without a special exemption under Jewish law. The lack of their calming presence on the Sabbath may be enabling a slightly more aggressive decision making by our Commander in Chief for those 24 hours.

In support of this thesis, Slate magazine went so far as to analyze Trump’s tweets since he won the Republican nod and determined that a tweet during Sabbath hours will have 17% more exclamation points and 29% more pairs of consecutive capital letters. These and other metrics suggest that the President is more “animated” during this window (although Slate notes the limitations of this analysis). Investors do not frequently turn to Vanity Fair or Slate for investing advice, but what does this mean for markets? It’s clearly a small sample size, as President Trump was inaugurated less than two months ago, but how have the markets performed specifically when President Trump’s most trusted confidants are not by his side?

The first trading day of a given week is the market’s first chance to react to weekend news and therefore may show a potential Trump Sabbath-effect on markets. Here is what we found so far, looking at both the S&P 500 index and the VIX (Fear!) Index. First trading day of the week for each week since inauguration:

-S&P 500 Index average daily return:

-0.025%

-VIX Index average daily return: +4.09%*Remaining days of the week since inauguration: 

-S&P 500 Index average daily return: +0.18%

-VIX Index average daily return: -0.91%

It is particularly worth noting that each first trading day of the week since the inauguration has witnessed a VIX price increase when compared to the previous week’s close. Are the weekend surprises causing Monday morning investors to be fearful? Certainly, there are limitations on this type of analysis. We would restate that this is a very small sample size, and we fully recognize other impacts on the market such as North Korea and the historical nature of VIX upward movements on the first trading day of a given week. That said, this potential Trump Sabbath-effect phenomenon begs to be further analyzed as the sample size grows during the weeks ahead. Alternatively, maybe the President should at least partially observe the Sabbath by refraining from the use of Twitter. We could all use the rest.