"Trump Dump Returns"... Stock Prices Fluctuate with One Outburst of Anger

Stock Plunge Targeting TSMC and Others
Concerns Deepen with 2nd Administration Launch

The 'Trump Dump' is back. Stocks targeted by former U.S. President and Republican presidential candidate Donald Trump are experiencing sharp declines. This pattern was also observed during his previous term. There are expectations that this trend, where stock prices fluctuate wildly with a single capricious remark from him during the launch of his second administration, will intensify further.

[Image source=Getty Images Yonhap News]

On the 30th (local time), the economic magazine Fortune highlighted the negative impact Trump has on the stock market as the 'Trump Dump' and reported accordingly. Fortune noted, "Stock price fluctuations rarely move due to a single factor, but there is substantial evidence that Trump’s tantrums often trigger market distortions," adding, "This phenomenon is particularly pronounced in companies and industries that he politically targets."

A prime example is the recent decline in the stock price of Taiwanese semiconductor company TSMC. After former President Trump attacked TSMC in an interview and questioned the U.S. defense of Taiwan, TSMC’s stock, listed on the New York Stock Exchange, plummeted by double digits. During the same period, the semiconductor index also dropped by about 10%. Fortune stated, "Looking at the stock price chart, it is clear that July 16, the date the interview was released, marks a distinct turning point," and added, "In the same interview, Trump attacked U.S. tech companies, which was followed by intensified selling of tech stocks." Trump’s criticism of green and renewable energy companies also led to a sharp decline in that sector’s stock prices.

Fortune assessed that the resulting market value loss outweighs the benefits expected from Trump's potential victory in the upcoming November presidential election. Earlier, following the first presidential debate and an assassination attempt on Trump, the so-called 'Trump trade' gained momentum, causing stocks of prisons, lending institutions, and gun manufacturers to soar. However, these sectors’ stock prices have recently declined again.

The Trump Dump phenomenon was also observed during Trump’s previous administration. Notable cases include Delta Air Lines, whose stock fell nearly 10% over two days following a single tweet in 2017, and Harley-Davidson, whose stock plummeted due to threats of tax increases based on unfounded outsourcing allegations.

Barron's analyzed that on days when Trump’s tweets included keywords like 'tariffs,' 'Federal Reserve' (Fed), and 'Powell' (Jerome Powell, Fed Chair), stock indices tended to decline. Merrill Lynch also released research showing a significant correlation between days when Trump tweeted frequently and stock market declines. Fortune evaluated, "The market clearly did not welcome Trump’s shift to protectionism or attempts to undermine the Fed’s independence."

There is analysis suggesting that this uncertainty would become even more dangerous if Trump’s second administration begins. Trump has already pledged a 10% universal tariff, signaling a tough protectionist policy. His chosen running mate, Senator J.D. Vance, is well known for rhetoric emphasizing anti-corporate and anti-monopoly stances. Recently, Trump’s remark at a rally that the New York Stock Exchange, which hit an all-time high, "makes the rich richer" is also a noteworthy point that cannot be overlooked.

Fortune stated, "This suggests a hardline economic populism," and analyzed, "Trump’s second administration will be very different from his first term, which was summarized by a corporate-friendly deregulation agenda." Another point to watch is the poor relationship between Trump and major U.S. corporate executives. Considering Trump’s characteristic of not hiding personal grudges or resentments, it cannot be ruled out that these executives could become primary targets. Ultimately, targeted companies will have to pay a higher price, and this cost will fall on shareholders. However, the magazine cited the previously observed Trump Dump as typically having only a temporary impact as the market’s sole hope."