economy
One year of 'TACO': How the trade has fared since 'liberation day'
Since “liberation day,” betting on the “Trump Always Chickens Out” theory has been a way to win in the market.
TL;DR
- The 'TACO' trade, coined "Trump Always Chickens Out," involves buying market dips based on the expectation that Trump's initial extreme policy announcements will be softened.
- This strategy saw success after "liberation day" tariffs and U.S.-China trade de-escalations, leading to significant market rebounds.
- However, recent events like the Middle East war present a challenge, as Trump cannot unilaterally resolve the conflict, making the 'TACO' trade less straightforward.
- Data on the continued success of the 'TACO' trade is mixed, with some traders still employing it while retail investor participation has reportedly waned.