On Trump’s inauguration day, the market goes on a jet coaster! On the presidential inauguration day, why does the market get turbulent?

Replay of January 20, 2025

The top-left of the chart is USDJPY, the bottom-left is Bitcoin USD, the top-center is the Nikkei 225, the bottom-center is the S&P 500, the top-right is oil, and the bottom-right is gold. The replay starts in the late New York hours, and Bitcoin has already moved significantly. The market is volatile around 10:00 a.m. Japan time on the 21st. During the celebration, there was also a scene broadcast of signing presidential decrees in the presidential office, with piles of decrees on the desk being signed one after another.

In a short period, USDJPY rose about 120 pips and fell about 130 pips; the Nikkei 225 rose 450 yen and fell 550 yen; the S&P 500 also moved back and forth by more than 50 dollars. Gold also showed correlated movement and seemed to be in an uptrend. It is not specified which presidential decrees were signed, but there were mentions of withdrawal from the WHO and comments on tariffs. People feeling unsettled may have moved into the safe asset of gold.

Subsequently, USDJPY entered an uptrend, while the Nikkei 225 and the S&P 500 stabilized; oil declined and gold rose. USDJPY rose about 130 pips, gold rose about 30 dollars, and the Nikkei 225 rose 600 yen, though there had been a drop of over 600 yen beforehand, falling and then recovering by 600 yen. Oil fell by about 2.2 dollars, suggesting influence from President Trump's "Drill, Baby, Drill" remarks.

Compared to past January 20

Next, let's compare with previous inauguration days. Maximize the chart and switch to a 5-minute interval. First, the full view of January 20, 2025, during the second induction of President Trump is shown.

Next is the chart of President Biden's inauguration on January 20, 2021. On that day, Trump had lost and Biden took office. The chart appears to move a lot, but measurements show about a 50 pips decline and about a 30 pips rise, not the kind of large moves seen this year. The market at the time was cautious toward the new administration's policies, and investors tended to wait and see.

Next is the inauguration day of President Trump’s first term on January 20, 2017. Like this year, volatility was high. Looking at the chart alone, there was a decline of more than 200 pips, followed by a drop of 250 pips. However, January 20, 2017 was a Friday, with the chart showing the weekend before Monday. The celebration happened during market closure, so reactions on that chart cannot be observed. Compared to this year’s second term, there was a clear downtrend, suggesting Trump’s uncertain policy stance may have depressed the dollar.

Why was there such a surge and plunge?

Market turmoil may have been triggered by swings in investor psychology. The market faced intermittent policy announcements and the effects of algorithmic trading,混ぎ in expectations and anxieties. The following hypotheses are considered.

■Intermittent policy announcements

On the first day of Trump’s inauguration, there were successive, intermittent presidential decrees signed. There was a performative element as well, and since the details of each decree were not announced individually, the scene of signing one after another created instability for investors and led to increased market volatility. In particular, expectations and concerns about important policies such as tax cuts and deregulation intermingled, causing investors to waver in their actions.

■Impact of algorithmic trading

In modern financial markets, algorithmic trading exerts a significant influence. Especially at major policy announcements, programs automatically buy and sell, causing market moves to magnify. On this day too, algorithms reacted rapidly to various news, causing large upswings and downswings in a short period. As a result, stop-loss orders were repeatedly swept, likely causing further fluctuations. The impact of algorithmic trading is one factor that increased short-term market volatility.

■Insecurity on inauguration day

Inauguration day for Trump was a day with extremely high uncertainty for the markets. In particular, given his past statements and actions, investors faced a mix of expectations and anxieties about future policies, making it difficult to gauge market direction. With economic policy directions unclear, trading directions were not established, leading to short-term sharp fluctuations. This situation could have psychologically affected risk-averse investors, further amplifying market instability.

Need for Verification Tools

Presidential inauguration days tend to be highly volatile for markets, with large price swings. A rollercoaster market like this could occur again on the next inauguration day four years later. In particular, with the increasing influence of algorithmic trading, short-term rapid changes are expected to occur more frequently, so caution is required.

Professor Azawa, a prop trader, also mentioned AI trading patterns. There is no doubt that this influence is growing.

■An efficient environment to verify ideas on demand

To review such market movements, using verification tools is extremely effective. By recreating past markets and revisiting them, you can identify trading improvements and prepare for future markets.

Verification tools should provide precise forward and backward movement with keyboard, unlimited synchronized charts, the ability to view information with a mouse, quick verification, and smooth, stress-free operation. A tool that simply synchronizes charts is fine, but having such verification tools can greatly enhance efficiency.

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