In a world where investing is becoming more and more intertwined with social media narratives (read: emotion), thus becoming more volatile – something firebrand quant Cliff Asness predicted in a rambling essay around two years ago now – we’ve had a fresh example overnight.
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As Australians slept on Tuesday night into Wednesday morning, something curious happened on oil markets. The U.S. Energy Secretary tweeted that the U.S. Navy helped a tanker navigate the Strait of Hormuz, which is currently subject to implied threats from Iran that have basically halted all traffic.
Cue a dip in oil prices (Brent) to US$85/bbl – up until the U.S. Energy Secretary then deleted that tweet. Then Washington confirmed the U.S. Navy had not, in fact, helped anybody navigate the Strait of Hormuz.
I am not going to linger on the backflip, given we’re probably all used to that kind of thing by now, which we really shouldn’t be. And yet the world continues to turn.
So it was, bam, just like that, prices straight back to US$90/bbl territory once that little error(?) was clarified. (The below screenshot was grabbed at 1pm AEDT; in the last few hours, the IEA has said it wants to release a massive amount of oil into markets, putting Brent back below US$90/bbl.)
Now, what does this tell us? Well, Twitter – or X, if you insist – remains an outsized force on investor psychology broadly when compared to other social media platforms. But it’s social media itself – particularly Twitter – that is of interest.
In CY23, a fake photoshopped image of an attack on the Pentagon saw billions of dollars shed off of Wall Street that May; the rout lasted for about half an hour before markets realised they’d been had.
The image in question looked like this.
But to suggest this is a recent phenomenon is to be ignorant of market history at this intersection. Because in CY13, we saw something similar happen – the Associated Press’ Twitter account was hacked, and nefarious actors published a statement that the White House had been attacked, harming Obama.
Even then – that was thirteen years ago – we saw Twitter involved in a miniature crisis for markets. Now we have Polymarket, where you can bet on the death of a foreign leader, and the modern trader has to be savvy at a level that requires nothing short of tertiary-level media literacy.
When Cliff Asness wrote that the victors of the future stock market(s) will be those able to navigate seemingly infinite layers of suspicion, it appears he was onto something.
The same is true for commodity traders, too.
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