TACO Friday
Donald Trump may have erupted when asked about the "TACO" trade this week, but it seems markets are just pleased it provides an element of predictability.
"Wall Street rallies on tariff delay and confidence". That was the headline of our Standup newsletter on Wednesday morning, which I think neatly surmises the state of play right now in global markets.
The benchmark US S&P 500 index rose more than 2% during that session off the back of news that US President Donald Trump’s planned tariffs on the European Union would be delayed until July, plus a separate but related jump in consumer confidence in the world’s largest economy (which many analysts attributed to an easing of trade hostilities between the US and China).
At the time of writing, the US equity benchmark has quietly recouped all of its post 'Liberation Day' losses, and with nearly five months of the year done, it is sitting just above water (+0.7%) so far in 2025. Anything could happen tonight on Wall Street, of course, but it’s safe to say things have changed significantly since the dark days of early April, when US stocks sank sharply into bear market territory in the space of a couple of sessions over tariff fears. The ASX (which fell hard, but not quite as hard as the US last month) has also recovered all its tariff induced losses and is up 2.8% year-to-date.
It was Financial Times columnist Robert Armstrong who in early May coined the market’s latest favourite acronym: "TACO" theory — the notion that the US president has a low tolerance for market pain, or to be precise, that "Trump Always Chickens Out" on tariffs. Trump and TACO related memes spread thick and fast in market circles on social media this week as the trade gathered momentum.
