The Plan for Protecting Portfolios Against Presidential Tweets Relies on Artificial Intelligence

The Plan for Protecting Portfolios Against Presidential Tweets Relies on Artificial Intelligence

Dec 8, 2016

Trump tweet effect

Boeing takes a hit from Trump tweet

On Tuesday, December 6, shares of stock in U.S. aircraft manufacturer Boeing ($BA) fell almost $2 per share before the market opened.

The reason for the nosedive was Donald J. Trump‘s tweet threatening to cancel the U.S. Government’s contract to build 2 new Air Force Ones due to projected cost overruns. As of Wednesday’s post market, Boeing is up to $154.14, higher than before the social media episode. Despite the recent overall market upswing experienced since the presidential election, businesses and many investors are unsettled about the use of presidential power to target companies and their earnings. Such actions have consequences long after the initial volatile reactions. One consequence is the notion that this will not be last influential tweet to affect the market.

We’re no longer talking about these market events as ‘Black Swans’ – we know better. Don’t accept such excuses from your advisor, fund manager, or broker. Better to ask how are they prepared for the next one.

So we arrive at the following question:

How can self-directed investors and their advisors be protected from (or take advantage of) more of this use of the social media-powered Bully Pulpit?

One important tool is the use of Artificial Intelligence to prevent impulsive, reactionary decisions and to seize on verifiable opportunities. At Trade Ideas we task A.I. to produce analysis for our clients. They use the results to make more informed decisions on how to manage risk and capture alpha.

To do this Machine Learning A.I. must sequentially:

  1. Recognize when an event, for which it has not prepared, is occurring.
  2. Preserve capital – sit on virtual hands and do no harm to the portfolio.
  3. Spot opportunity to act when others hesitate or do not.

This logic ensures a steady hand when calamity hits the markets – whether in the form of a Brexit event or president-elect’s tweet.

We are living in interesting, amazing times. Markets are and will continue to rapidly evolve in the face of changing market structures and technology innovation. It’s time to ask questions of fund managers, advisors, and yourself, “What’s the plan for navigating markets that we all know are changing? How is Machine Learning A.I. a factor in the plan and will it be a tool we deploy in our decisions or one that we’ll be performing against?”

At Trade Ideas we’re providing access for individuals and institutions to algorithms tested and optimized by A.I. that our system, named HOLLY, publishes and monitors on a daily basis. Her YTD performance when compared to the S&P 500 ($SPY) describe the actionable market intelligence better than words.

A.I. Performance Results

A.I. Performance YTD vs S&P (SPY) is significant

For more of an explanation of these results and a daily performance report, visit our blog.

At Trade Ideas we’re getting ready to close the book on a great year of innovation and growth. As we welcome the new one, we’re not letting the tail wag the dog. Let’s put aside opinions on the country and focus on how individual investors, advisors, and managers can better adapt to new realities in the markets and prepare for what’s to come. That sounds like a plan.