The new meme, first floated by The Financial Times this month, is making the rounds on Wall Street as a blueprint for playing the stock market in 2025.
“I think the only person or entity he listens to is the stock market,” Eric Sterner, the chief investment officer at Apollon, told Business Insider.
“I think that’s a big part of his scorecard — what the stock market does.”
The subsequent rally in a handful of assets such as crypto, Tesla stock, and bank shares was dubbed the Trump trade.
But how long the TACO trade will remain effective depends on what happens after the tariff delays unwind over the summer.
It was the Trump trade first, and now it’s TACO. Initially proposed by The Financial Times this month, the new meme is circulating on Wall Street as a guide to stock market strategy for 2025.
What is the TACO trade?
“Trump Always Chickens Out” is what it stands for. “.”.
The stock market has plummeted in response to President Donald Trump’s trade war declarations, as has been shown multiple times this year, but it always surges back up when the president backs off.
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In other words, it could be a good time to buy when Trump announces new tariff policies.
Several instances of the TACO trade in action have surfaced in the months since Trump took office.
In the days that followed Trump’s April 2 announcement of his broad “Liberation Day” tariffs, the SandP 500 fell more than 12 percent. Trump’s announcement of a 90-day pause on April 9 sparked a ferocious stock rally, which included the S&P 500’s best day in almost 20 years.
Since the White House announced a framework trade agreement with China in mid-May that reduced tariffs for 90 days, the index has increased by more than 1 percent. Stocks recovered all of their losses since the April lows thanks to the development.
The most recent example occurred just last week, when the stock market plummeted in response to Trump’s call for a 50 percent tariff on the European Union beginning on June 1. Trump then declared over the weekend that he would postpone the tariffs until July 9. After traders returned from Memorial Day, the S&P 500 saw a nearly two percent recovery on Tuesday.
“I believe the stock market is the only person or thing he pays attention to,” Apollon’s chief investment officer, Eric Sterner, told Business Insider. “I believe the actions of the stock market make up a significant portion of his scorecard. “..”.
Trump retaliated Wednesday, calling the TACO acronym “nasty” in response to the claim that he has given in to market protests. “.”.
When a reporter asked the president, “If I didn’t impose a 50 percent tariff, they wouldn’t be over here today negotiating,” he replied. “The unfortunate thing is that they will now say, ‘Oh, he was chicken,’ when I make a deal with them that is far more sensible. He was a chicken. . I can’t believe that. “,”.
why it is important.
Wall Street experienced a tremendous surge of bullish enthusiasm following Trump’s election victory. The ensuing surge in a few assets, including cryptocurrency, Tesla stock, and bank shares, was known as the Trump trade.
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Possessing market segments that were anticipated to gain from Trump’s agenda was a surefire way to make money, according to the theory. But some of those wagers backfired, primarily as the trade war eventually overshadowed any hopes for deregulation or other White House agenda items.
Investors now have a new guiding principle thanks to TACO.
Purchase the Trump tariff cut. In essence, Trump has demonstrated to investors that he will not enact harsh tariffs, Sevens Report writer Tom Essaye wrote on Wednesday. “Any sell-off that happens after a significant tariff threat should therefore be purchased. “,”.
Dip-buying has recently reached historic levels as a result of the strategy’s adoption by retail investors. However, what occurs after the tariff delays end over the summer will determine how long the TACO trade is in effect.
Although that isn’t Apollon’s base case, Sterner cautioned that if trade agreements aren’t negotiated before the tariff pauses end, there’s a good chance the US will experience a more severe downturn.
Sterner stated that if this game goes on, the US economy will eventually enter a recession, which is when the game ends badly.
