Wall Street’s New Trend: The ‘TACO’ Trade Phenomenon

Wall Street investors have coined a cheeky acronym to encapsulate President Trump’s unpredictable trade decisions: TACO, short for "Trump Always Chickens Out." This emerging trend highlights the sharp volatility in the markets that often follows the president’s trade announcements.

What Does ‘TACO’ Mean?

• T: Trump
• A: Always
• C: Chickens
• O: Out

The term reflects a pattern where Mr. Trump threatens significant tariffs, causing a dive in the stock market, only to backtrack later, sending stocks soaring once again.

Real-World Example: Market Reactions

Last week exemplified this cycle. President Trump declared a 50% tariff on goods from Europe. The immediate market response was negative:

• Dow Jones: Lost 256.02 points
• S&P 500: Decreased by 0.67%
• Nasdaq Composite: Declined 1%

However, just days later, the White House announced a delay on the tariffs until July 9, citing ongoing discussions with other nations. This prompted a significant market rebound:

• The Dow jumped 721 points
• S&P 500 soared by 2.1%
• Nasdaq increased by 2.5%

Investor Insights on the ‘TACO’ Strategy

Many investors have begun to utilize the TACO strategy, betting on stock rebounds following Trump’s threats. As noted by Ted Jenkin, president of Exit Stage Left Advisors:

“Once he delivers bad news, investors are buying those stocks when they are beaten down waiting for him to chicken out, and watching those stocks rebound in value.”

Paul Nolte, a senior wealth advisor at Murphy and Sylvest, added:

“Investors have kind of figured Trump out a little bit. He’s like the poker player at the table that you know is making some bets, and then when pressed, he folds.”

The Impact of TACO on Market Sentiment

The TACO strategy has yielded lucrative outcomes so far. Notable instances include:

• April’s ‘Liberation Day’ tariffs: Initially sent stocks tumbling, only for Trump to pause them a week later, resulting in a market surge.
• Threatened tariffs on China: Similar pattern observed where initial fears resulted in drops, followed by sharp rebounds after announcements of delays.

Credibility Concerns: A Market Economists Viewpoint

Market economist David Rosenberg of Rosenberg Research summarized the situation:

“The question is, at what point will the President’s credibility become impaired? You only get so many tries at kicking the tariff can down the road.”

This ongoing market behavior resembles Pavlov’s dog, responding to Trump’s announcements with conditioned reactions.

President Trump Responds to the ‘TACO’ Nickname

In a recent press briefing, the president addressed the TACO acronym, expressing his displeasure:

“I’ve never heard that… Do you call that chickening out?”

He further criticized the question posed by the reporter, labeling it as “nasty.”

Conclusion

The TACO trade phenomenon highlights a volatile yet profitable landscape for investors willing to navigate the uncertainties of President Trump’s trade policies. As markets continue to respond to these dynamic changes, both traders and analysts remain vigilant, watching for the next twist in Trump’s tariff game.

For further reading on the effects of trade policies on the stock market, explore articles on MarketWatch and Investopedia.