The article discusses the emerging 'Taco trade' narrative, where investors perceive that President Trump backs down whenever faced with market backlash, leading to stock market recoveries. Despite imposing historically high tariffs, the S&P 500 has seen gains through 2025, highlighting a belief among investors that market turmoil encourages Trump to amend his policies favorably. The concept, coined by Financial Times columnist Robert Armstrong, questions whether accusations of weakness will motivate Trump to adopt a tougher stance in trade negotiations with other countries.
The Taco trade narrative: whenever market turmoil arises, Trump will retreat, allowing companies to continue profiting, despite the heavy tariffs he has imposed.
This belief has empowered investors who expect Trump's responses to market disturbances will alleviate concerns, boosting stock performance even amid global trade tensions.
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