I’m endlessly amazed (and amused) by the acronyms that market participants come up with. Anyone remember what FANG, BRIC, and/or TINA stood for? Well, don’t worry about those because there is a new acronym starting to take hold. It’s a catchy take on a favorite food – TACO.. which stands for “Trump Always Chickens Out” (best I can determine, authorship belongs to a Financial Times columnist)

Don’t shoot the messenger and/or take this to be at all political – I’m merely relaying a client question that came up after they heard this term and wondered about the efficacy of the current trading strategy surrounding it.

In short, this “TACO trade” has come to pass based on the on again/off again nature of the Trump Administration’s tariff plans. Markets tumble on the initial tariffs announcements, only to recover once Trump (seemingly) relents on the plans or pauses them.

We’ve seen this scenario play out enough times that market participants felt they needed a clever way to describe the current reality. It is true this keeps happening: broad based/global tariffs were first floated on April 2nd Liberation Day’s announcement but were then put on pause later that month. Tariffs against China reached 145% but have since been drastically reduced. And most recently, 50% tariffs were proposed for the European Union but were then paused until July only two days later.

The question remains – can investors always count on “TACO” after a severe tariff announcement? While it’s true that these policy retreats are becoming (almost) a given, it does remain a very unpredictable and dangerous prediction to make. President Trump prides himself on negotiations (he wrote a book called “The Art of the Deal”) and tariffs were a key campaign promise so it’s very unlikely we’ve seen the last tariff escalation discussion and/or tweet. Further, the latest budget bill (now in front of the Senate) is set to further raise the deficit so offsetting revenues undoubtedly remain of interest to the Administration.

However, it’s also important to keep in mind that the damage to the US economy from some of these proposals cannot be ignored (especially when it comes to directly observable impacts like movement in Treasury yields and the US dollar).

All that to say, TACO is likely here to stay but I would not use it as a fail safe trading tool. This is a volatile environment, made even more unstable with the on again/off again/on hold for now situation we are applying to global trade at the moment. Relatively meaningful moves in both directions remain likely for the duration of 2025 and beyond. As a long-term investor, you can use them to your advantage. On the “downs” – continue to dollar cost average via your employer plan, harvest any losses, put any new cash you are looking to deploy to work. On the “ups” – reduce concentrations, rebalance to your target, monitor sector weights. In short, stick to your long term tool kit and leave TACO for your weekly meal plan!

Side note: President Trump was asked about TACO this week. His response? “I chicken out? I’ve never heard that,….Don’t ever say what you said,…That’s a nasty question. To me, that’s the nastiest question.”