U.S. stock markets are maintaining gains as investors show confidence that inflation risks will subside, facilitating a Federal Reserve interest rate cut later in the year. This optimism is largely due to the TACO trade, which reflects bets that Trump will lower tariff levels, leading to an accommodative monetary policy. Despite a slight decrease in the S&P 500 and ongoing uncertainty around global tariffs, recent statements from Fed Chairman Powell suggest a forthcoming rate cut if inflation stabilizes. Investor sentiment hinges on the belief that tariffs will decrease, reducing inflationary pressures.
Investors are confident that inflation risk will dissipate, leading to expectations of a U.S. Federal Reserve interest rate cut later this year due to the TACO trade, which suggests that tariffs will decrease.
The TACO trade, which stands for "Trump Always Chickens Out," reflects investor belief that President Trump will ultimately reduce tariffs, easing inflation pressures and supporting rate cuts.
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