Illustration: Sarah Grillo/Axios

The "tweet" button on President Trump's iPhone is moving markets and has become increasingly consequential for trillions of dollars of assets around the globe.

Why it matters: The markets don't trust Trump — nor his Treasury secretary, Steven Mnuchin — to be a calming influence in times of stress.

  • Quite the opposite: They now expect Trump to be an unsettling influence even when things are otherwise quiet. And they're worried that even the Fed is falling under Trump's spell.

What they're saying: A new paper from the National Bureau of Economic Research finds that whenever Trump tweets about interest rates, the market prices in a little bit more of a future rate cut.

Market participants believe that the Fed will succumb to the political pressure from the President.
— Francesco Bianchi, Howard Kung, and Thilo Kind, NBER

JP Morgan's Volfefe index demonstrates that Trump's tweets have also increased volatility in the futures market more broadly.

My thought bubble: The markets normally look to the U.S. Treasury secretary for reassurance during difficult times, but as WaPo's Tory Newmyer says, Mnuchin is "Trump's most loyal surrogate." When Mnuchin weighs in on issues like Trump's conversations with Ukrainian president Volodymyr Zelensky, that damages his credibility more broadly.

  • Trump's fiscal policy is also adding to market volatility. The Trump tax cuts have caused trillion-dollar deficits, which means the government has a huge and constant thirst for free cash. That in turn exacerbates liquidity shortages like the one we saw last week.

The bottom line: The stock market has done a pretty good job of shrugging off Trump's tweets, most of the time. But money markets — the places where businesses keep most of their cash — are much more important for a smooth-functioning economy than the stock market is. And they're showing increasing signs of concern.

Go deeper

1 hour ago - World

U.S. policy shift will allow taxpayer funding for projects in West Bank settlements

Friedman (L) with Netanyahu. Photo: Menahem Kahana/AFP via Getty Images

The U.S. and Israel will announce tomorrow that they are expanding three agreements on scientific cooperation to include Israeli settlements in the West Bank, Israeli and U.S. officials tell me.

Why it matters: This is a substantial policy shift for the U.S., which did not previously allow its taxpayers' money to be spent in the Israeli settlements.

Updated 2 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Politics: Obama: Trump is "jealous of COVID's media coverage" Axios-Ipsos poll: Federal response has only gotten worse.
  2. Health: Hospitals face a crush — 13 states set single-day case records last week.
  3. Business: Winter threat spurs new surge of startup activity.
  4. Media: Pandemic causes TV providers to lose the most subscribers ever.
  5. States: Nearly two dozen Minnesota cases traced to three Trump campaign events.
  6. World: Putin mandates face masks.

McConnell: Confirming Amy Coney Barrett will help GOP retain Senate

Photo: Samuel Corum/Getty Images

Senate Majority Leader Mitch McConnell (R-Ky.) expressed no regrets about Judge Amy Coney Barrett's controversial confirmation, telling Politico in an interview that he believes the decision to place her on the Supreme Court just a week before the election will help Republicans retain the Senate.

Why it matters: With a week to go until Election Day, many Republicans are concerned that President Trump's unpopularity could cost them the Senate. McConnell has long viewed the transformation of the federal judiciary through the confirmation of young conservative judges as his defining legacy.

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