Misinformation in Volatile Markets

Misinformation becomes especially dangerous in volatile markets... 😱

After President Trump's tariff announcement on "Liberation Day" last Wednesday, markets have roiled. The easiest way to see this is measuring VIX. This index averages the implied volatility of SPX options expiring in a month. It is known as the "fear gauge" because it goes up when markets are uncertain, and therefore fearful. VIX typically hovers around 20-30, but after Liberation Day, it has spiked to 40-50.

Market participants are waiting with bated breath for any news on the tariffs, whether they will be permanent or temporary, or be exempted from certain markets.

So when a tweet went viral from someone named "Walter Bloomberg" declaring that Trump was considering a 90-day pause on tariffs, the markets reacted immediately.

The S&P 500 jumped up 300 points in just ten minutes, representing over $2.5 trillion in value. But this optimism wouldn't last.

When the market realized that the tweet had no factual basis (it was a wild misinterpretation of Hassett's remarks on Fox News days earlier), the market tanked back to its earlier levels.

And after the White House confirmed that the tweet was fake news, the S&P continued as it had before, albeit with more volatility than normal.

It's a sharp reminder of how even the smartest traders on Wall Street can get taken in by seemingly-plausible BS on social media.

If they can be fooled, so can you.

Read more at Bloomberg: https://lnkd.in/eBRP9jZg