Markets wrapped up a turbulent week of policy pivots, conflicting trade headlines, and mixed economic signals. At the center of Wall Street chatter: the so-called “TACO” trade — shorthand for “Trump Always Chickens Out.”
The phrase reflects growing investor confidence that Trump’s tough talk on tariffs rarely materializes into action, encouraging risk-taking behavior and equity rallies. That logic has supported a rebound in stocks following early May’s tariff escalation scare.
However, the narrative wavered this week after Trump accused China of violating the US-China trade deal in a post on Truth Social. Meanwhile, Bloomberg reported plans from the Trump administration to expand tech restrictions by targeting subsidiaries of blacklisted Chinese companies. The news sent markets lower on Friday.
S&P 500 Ends Best May Since 1990
Despite the tension, the S&P 500 secured its strongest May performance in 34 years, rising over 6%, while the Nasdaq jumped nearly 10%.
Some investors remain skeptical the “TACO” strategy can keep working. Julie Beale of Kayne Anderson Rudnick warned that publicly mocking the TACO idea might embolden Trump to double down on tariffs.
“That actually creates more uncertainty,” Beale said. “He might try to prove people wrong.”
Still, retail traders continue to profit from the volatility, aggressively buying the dip during sharp market pullbacks.
“They’ve gotten good at capitalizing on these reversals,” Beale added.
But economists caution that this kind of headline-driven market is risky.
“It’s a roller coaster ride,” said Paul Gruenwald, chief economist at S&P Global. “Not good for long-term planning, and not good for corporate investment.”