"Investors should be watching this closely. The TACO trade lacks the precision of a proper model, yet the repetition looks too consistent to ignore,"
"Markets are built on pattern recognition. Traders, asset managers, and risk teams search for recurring behaviour because behaviour shapes positioning. Tariff threats push equities lower, volatility rises, and defensive assets attract flows. Policy then softens, negotiations emerge, and markets rally. Observing that rhythm influences decision-making even without a formal framework. Market participants should treat this as behavioural finance in action rather than a guaranteed strategy. Patterns can persist, then fail, so discipline matters."
Policy volatility under President Donald Trump is producing a recurring market pattern nicknamed the TACO trade, where aggressive tariff threats or policy escalations trigger sell-offs and increased volatility. Markets then rebound when threats are softened, delayed, or shifted toward negotiation, prompting defensive assets to attract flows during sell-offs and equities to rally on policy retreats. Traders, asset managers, and risk teams recognize and act on this recurring behaviour, shaping positioning and decision-making. The pattern lacks formal model precision and can fail, so observers emphasize treating it as behavioural finance rather than a guaranteed trading strategy.
Read at London Business News | Londonlovesbusiness.com
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