Is Donald Trump Losing ‘Perception Battle’ on Coronavirus Pandemic and Why Should Markets care?
In some of our previous insights, we had highlighted that how sentiment in news flow on US President, Donald Trump had quickly and significantly worsened. This is a sudden change because on 6th April, we wrote ‘Because markets are influenced by the sentiment for news flow around some very important and immensely popular key words, the results are important for market direction. The biggest positive jump is seen for US President, Donald Trump’.
But things have changed completely on news sentiment for Trump a week later. There was a sharp dip in sentiment in media coverage on Trump and the way he is handling the Corona crisis, both his ability and intent.This was peculiar for two reasons. The first is that in the past, US presidents have mostly benefitted from crisis and difficult situations have usually worked for them politically as well as from the media coverage point of view. It happened with FDR during Second World War, with JFK during Cuban Missile Crisis, with Bush Senior during First Gulf War (though he lost his re-election bid for different reasons i.e. poor record on economy which was brilliantly exploited by Bill Clinton) and with Bush Junior during 9/11 attacks.
The other is that the Corona crisis has helped majority Global leaders in getting a strong boost in their image. It has helped the President of France, Emmanuel Macron and also Japanese Prime Minister, Shinzo Abe. This is the situation elsewhere too. The crisis has not done anything to dent the image of Justin Trudeau in Canada, Narendra Modi in India or Boris Johnson in UK. Even Angela Merkel from Germany and Vladimir Putin from Russia also have not been doing too badly.
While it is true that we don’t know much about the impact on Xi Jinping, the President of China as it is too early to understand because of lack of credible data from the country. The only exception could be Jair Bolsonaro of Brazil because of his poor handling and more so because of his irresponsible media statements about the potential negative impact of Coronavirus as a health emergency. But overall, it is safe to say that Corona crisis may have been a health crisis or economic crisis, however it has not been a political crisis for most global leaders, at home for them so far.
Then why it is happening with Trump and why the Corona crisis is also a media crisis for him. While it is always easy to look at reasons with the benefit of hindsight, the inconsistent approach, underestimating the crisis and being in rush to lift the lockdown could have been the key factors in making Trump an easy media target and for this thought to resonate with common people. In short, the sentiment in news on Trump is negative because media has been highlighting that how Trump has failed to show true leadership and has been by and large evasive in his approach.
Why this is important for markets?
a) How Trump is being in handling the Corona crisis is important for US markets over next few weeks,
b) though it is too early to talk about this and the core voter base of Trump may still remain unaffected, the negative news sentiment if it sustains may play a role in US presidential elections. The race will be close, there is no doubt and even a small swing could change the end result. Markets have been kind to Trump so far and if Biden gets elected, that may be a big negative for the US markets. Too early but an interesting scenario nonetheless.
EM Alpha LLC
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EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious.Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.
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