Investor playbook: 'TACO' trade gains steam but isn't foolproof
US markets (^GSPC, ^IXIC, ^DJI) are swinging on shifting trade signals and tariff uncertainty tied to President Trump's latest comments and legal setbacks.
Yahoo Finance Senior Reporter Allie Canal breaks down how the so-called "TACO" trade ("Trump Always Chickens Out") is shaping investor sentiment and what to watch ahead of jobs data next week.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
Well, it's been another busy week of policy pivots, headline whiplash, and economic data that's left investors more confused than confident. But through it all, one phrase has gained prominence this week: the "Taco Trade," short for "Trump Always Chickens Out." That phrase sums up a growing view that while the president talks tough on tariffs, he rarely follows through. And it's that assumption that's driven the market recovery we've seen over the past month. Still, it's not foolproof. We saw sentiment take a hit today after Trump fired off a post on Truth Social, accusing China of quote "violating its trade deal." Just hours later, Bloomberg reported the Trump administration is planning to tighten tech sanctions targeting Chinese subsidiaries that have been skirting existing curbs. The news initially sent stocks sharply lower, before we saw a bit of a rebound heading into the close, and adding another twist to the saga, a federal trade court in Manhattan struck down a swathe of Trump tariffs, citing legal flaws in how they were imposed. And although a federal appeals court temporarily paused that ruling, it's just adding more fuel to the fire when it comes to a lot of this market uncertainty. Looking ahead, some say stocks are banking too heavily on Trump backing down again. Here's what Wall Street experts told Yahoo Finance this week.
We told Donald Trump that that we have this Taco Trade, and so I worry a little bit that that actually makes him bear down a little bit more and decide to be more, you know, more gripping on some of these tariff trades. And so, I have a little bit of a concern that that creates actually more uncertainty.
So, I don't think this is the last word on tariffs, but I agree this is a roller coaster ride, not good for long-term planning and not good for corporate investment.
Based on the past, we're going to get a lot of, "He loves me, he loves me not," the Taco Trade, the Tofu Trade. We're going to get a lot of that talk back and forth. But what investors really need to be focused on is economic data, especially the jobs week that's coming up next week and what the Fed is doing in response.
So, bottom line here, the Taco Trade may still potentially have some mileage, but as politics, policy, and legal realities collide, that bet could be looking a lot riskier. And guys, I looked up what exactly the Tofu Trade is that Callie Cox referenced. Apparently, it's been circulating on ExitStat. Trump always likes to intervene when markets are at highs. I don't really know how the acronym plays out fully there, but it just goes to show how investors are really trying to understand this administration amid all of these shifting trade policies.
Yeah, it is hard to follow. Acronyms can help though. Ali, thank you, appreciate it.
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