TACO Trade Is This the Spiciest Meme Stock Strategy Yet?

The TACO Trade: Is "Trump Always Chickens Out" the New Stock Market Mantra?

Remember the "Trump trade"? The initial surge of optimism following Donald Trump's election, fueled by promises of deregulation and economic growth? Well, Wall Street might have a new meme to guide its investment strategies, and it's encapsulated in a rather cheeky acronym: TACO.

No, we're not talking about everyone's favorite Tuesday treat. In this context, TACO stands for "Trump Always Chickens Out," and it's rapidly gaining traction as a blueprint for navigating the stock market in 2025.

What Exactly is the TACO Trade?

The core concept is surprisingly simple: President Trump's pronouncements of trade wars and tariff hikes often send the market into a brief dip. However, history has shown a pattern of the President backing down or delaying these measures, leading to a subsequent market rebound.

In essence, the TACO trade suggests that when Trump announces new tariff policies, it might be a strategic time to buy.

Examples of TACO in Action

Several instances throughout Trump's presidency seem to validate this theory:

• April 2nd "Liberation Day" Tariffs: The S&P 500 plunged over 12% following the announcement.
• April 9th Tariff Pause: Trump's announcement of a 90-day pause ignited a significant stock rally, marking the best day for the S&P 500 in nearly two decades.
• Mid-May China Trade Deal Framework: The S&P 500 gained over 1% after the White House announced a framework trade deal with China that lowered tariffs for 90 days, recovering all losses since the April lows.
• Recent EU Tariff Threat: Trump's call for a 50% tariff on the EU sparked a market slide, followed by a nearly 2% rebound after the tariffs were delayed until July 9th.

Why Does TACO Matter?

The initial "Trump trade" focused on benefiting from the President's agenda. However, the ongoing trade war has overshadowed much of that early optimism. TACO offers a new lens, suggesting that short-term dips caused by tariff threats can be opportunities.

As Tom Essaye of the Sevens Report succinctly put it: "Buy the Trump tariff dip. Essentially, Trump has proven to investors that he won't actually follow through with draconian tariffs. As such, any sell-off following a dramatic tariff threat should be bought."

Is TACO a Sustainable Strategy?

While the TACO trade may offer short-term gains, its long-term viability is uncertain. Eric Sterner, the chief investment officer at Apollon, warns that continued reliance on this strategy could lead to a damaging downturn if trade deals aren't negotiated before tariff pauses expire.

"If this game continues, it will put the US economy into recession at some point, and that's when that game ends in a bad way," Sterner cautioned.

The Bottom Line

The "Trump Always Chickens Out" trade highlights the market's sensitivity to political and economic announcements. While it might provide opportunities for savvy investors, it's crucial to remember that short-term gains should be balanced with a broader understanding of potential long-term risks. Ultimately, a well-diversified portfolio and a cautious approach remain essential in navigating today's complex financial landscape. The TACO trade may be a fun meme, but responsible investing should always be the main course.

Tags: Trump trade, TACO trade, stock market, Wall Street, 2025, Trump tariffs, tariff policies, S&P 500, investing, meme stock

Source: https://www.businessinsider.com/trump-trade-taco-tariffs-buy-the-dip-trade-war-sp500-2025-5