In a normal election year, politics are often driven by economics. But as COVID-19 spurred record job losses and stock market sell-offs, Tony Cookson鈥攁n associate professor at 兔子先生传媒文化作品鈥檚 Leeds School of Business鈥攁nd other researchers noticed something curious: political persuasion was driving a wave of stock market optimism.
Cookson and researchers Joey Engelberg and Will Mullins at the Rady School of Management at the University of California San Diego found Republican traders were more optimistic about a stock market rebound than non-Republicans. They detailed their findings in a .
Headshot of Tony Cookson, associate professor at 兔子先生传媒文化作品's Leeds School of Business.
Using keywords like #MAGA or #Trump2020, the researchers poured through more than 5 million posts on StockTwits, a social media website geared toward stock traders, for clear markers of conservativism. They found users who made frequent references to President Donald Trump or some of his favorite talking points tended to be more optimistic about a quick stock market rebound. The research also shows StockTwits posts correspond with actual trades in the market, indicating Republican optimism on the platform likely translates to more bullish trading.
鈥淚t really jumped out of the data,鈥� Cookson said. 鈥淐OVID-19 is a period of substantial uncertainty. One reaction is to seek new information, another is to default to a core identity that gives you comfort.鈥�
For some traders, that comfort comes from looking to the commander in chief.
鈥淭hey believe the president. That鈥檚 not an unnatural way to guide your beliefs, believing the leader of your country,鈥� Cookson said.
The findings are important, according to Cookson, because they give insight into how people make decisions with their money in times of crisis.
鈥淭he world in the face of COVID-19 forces us to ask different questions about how investors form their opinions,鈥� he said. 鈥淚t can be overwhelming to make these choices. It鈥檚 interesting that we saw politics mattering as much as it does.鈥�
Some partisan pessimism
While Republican StockTwits users were optimistic about an overall stock market rebound, they also followed the president鈥檚 lead in souring on Chinese relations.听
The researchers found Republicans became significantly more pessimistic about Chinese companies as COVID-19 cases increased in the U.S. Chinese cases, however, were on the decline by that point, suggesting political motives rather than economic motives, according to Cookson.
鈥淚 thought it was pretty profound,鈥� Cookson said. 鈥淭hose differences between Republicans and non-Republicans seemed to have more nuance to it than a simple story would tell.鈥�
An apolitical study
While the researchers were looking at Republicans鈥� decision making compared to the rest of the market, Cookson said the study itself is not designed to make a political statement.
鈥淲e aren鈥檛 litigating who we think is right, we鈥檙e observing that they鈥檙e coming to different conclusions,鈥� he said.
That鈥檚 important to explore, Cookson said, especially in a time where money is rapidly changing hands. The paper notes that daily trades of stock shares rose about 36% from historical averages amid COVID-19. 听As the pandemic is rife with uncertain and changing information, people are left to essentially trust their gut. The researchers found 20% of that turnover was due to political preferences.
鈥淭hose core aspects of ourselves often guide how we feel. When we can鈥檛 get enough information, that tends to be the backstop.鈥�
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