Wait 72 hours before trading! The market has summarized the "trading rules for the Trump 2.0 era".
After Trump returned to the US political arena, he frequently posted policy information on social media, causing market turmoil. To avoid losses caused by rapid policy reversals, bond market investors have summarized the "72-hour trading rule": if there is no reversal within 72 hours after Trump posts a message, then take trading actions.
Bond market investors are "on edge"
Bond investors have suffered losses many times by immediately responding to Trump's tweets.
For example, after Trump posted a threat to impose a 200% tariff on European wines, many investment banks quickly conducted over-the-counter transactions, betting on the decline of bond prices of related companies (such as packager Ardagh Group SA, Verallia, and label manufacturer Fedrigoni SpA).
However, a few days later, when the final tariff list was announced and there was no wine on it, the bond prices rebounded rapidly, catching those who acted in advance off guard. Similarly, the threat to impose a 50% tariff on Canadian steel was soon abandoned.
These frequent reversals have made bond investors wary of Trump's tweets.
The "72-hour rule": seeking certainty in the midst of反复
After learning from painful experiences, some banks and investors have started to adopt the "72-hour rule", that is, avoid taking actions within 72 hours after Trump posts policy information to prevent losses caused by rapid policy reversals.
The media quoted three senior bond market experts as saying that after Trump posts any potential major policy information, they will hold back and wait for three days (72 hours). If his stance remains unchanged or is not withdrawn by then, the market tends to believe that the policy may actually be implemented and conduct transactions accordingly.
Catherine Braganza, a fund manager at Insight Investment, said:
"We no longer act immediately because there is always a risk of policy reversal. Investors are gradually becoming immune to such information."
Racing against the "tweet storm": time zone advantage and accelerated trading
In addition to post-event observation, the market is also seeking to actively avoid risks.
European bankers have found that they can gain precious time by taking advantage of the time zone difference. They have started to accelerate the bond issuance process, trying to complete pricing and lock in investors before Trump "wakes up" to post tweets and before potential emotional disturbances are brought by the opening of the US market.
"Everyone is highly vigilant about the 24-hour headline risk, especially during the US session when it occurs more frequently," Matteo Benedetto, co-head of the investment-grade syndicate at Morgan Stanley EMEA, said frankly. "It's definitely better to complete the transaction before the opening of the New York market."
This sense of urgency has changed the operating practices: Irish telecom company Eircom Finance DAC rarely completed the issuance, roadshow, and pricing of junk bonds in one day; even blue-chip giants like LVMH chose to finalize the terms of its 1.9 billion euro bond before 1 pm European time to avoid risks in the US market.
Shifting investment focus to "tariff-resistant" industries
The continuous policy uncertainty, combined with economists' estimate at that time that the probability of a "Trump-induced recession" in the next year was 45%, prompted credit investors to re-examine risks. Companies such as General Motors, Mercedes-Benz, McDonald's, and Procter & Gamble either withdrew their performance guidance or reported a decline in sales, further strengthening the market's risk-averse sentiment.
Against this background, investors have started to favor non-cyclical industries that are less affected by trade frictions and have stable demand.
Braganza of Insight Investment said that her company is paying attention to canned tomato producers, mobile phone service providers, etc. "People won't stop cooking because of tariffs, and they won't throw away their phones," she explained.
Some investors are calling on the market to return to fundamental analysis and focus on the core value of enterprises, but in the reality of deeply intertwined global supply chains, "it's easier said than done".
Perhaps, as Fabiana Fedeli of M&G Investments said, dealing with the risk of Trump's tweets "is more of an art than a science".
This article does not constitute personal investment advice and does not represent the views of the platform. The market is risky, and investment should be made with caution. Please make independent judgments and decisions.
This article is from the WeChat official account "Wall Street Insights", author: Gao Zhimou.
