What is the “Taco Trade” and How is it Prevalent in Today’s Markets

You might mistake this for a new Mexican futures derivative, but as financial commentators advise, the word TACO is an acronym for “Trump Always Chickens Out”. It describes a strategy where investors “buy the dip”* after a sell-off caused by a Trump policy threat, betting that he will eventually back down or soften his stance.

*Buy The Dip – This is a strategy which involves the buying of assets such as stocks and shares, cryptocurrencies and commodities such as gold and silver, where the aim is to buy low and then profit from the subsequent rebound. Experts advise it works best in long-term upward trends where temporary price dips occur. However, in today’s world, the Middle East crisis together with remarks from President Trump makes buying the dip an almost weekly occurrence. 

There are three stages to this trade:

1. First, there is the shock when President Trump makes a bold announcement, such as an increase in tariffs, or in today’s world, military attacks and threats. Such actions can cause share and gold prices to drop, sparking off a round of intense market volatility. 

2. The second stage is the Pivot where faced with negative market reactions or economic pressure, the President softens his stance or rhetoric, delays implementation, or negotiates a framework. 

3. Finally, there is the Rebound where the threat is reversed, markets recover quickly allowing those who bought at low prices to sell for a profit. 

The TACO trade was initially brought to the fore on Liberation Day, 2^nd April 2025, when President Trump announced a steep imposition of tariffs on friends and foes alike, with about 90 countries being hit with blanket tariffs. However, President Trump quickly backed down on his Liberation day tariffs, (except for China) as markets reacted by going into meltdown, and tariffs that were threatened on the Eurozone in May 2025 were quickly pulled back days after they were announced. 

A number of traders in the financial markets accused President Trump of chickening out and started making trades accordingly and thus the TACO trade was born. Today the Taco trade has been reborn with some vengeance due to the surprise attack on Iran by President Trump. The use of Truth Social by President Trump during the current US/Iran/Israel conflict has already upended markets. Recently, he rowed back on threats to hit Iran’s power plants.

So, President Trump chickened out and as a result of his pronouncements stocks rallied, oil prices dropped as he bought time for further negotiations. On another recent occasion, the President announced he was in talks with Iranian officials to end the war, once again oil fell, gold went up, and stocks went up. Iran announced that no talks had been held and the markets swung into reverse with gold going below the support level of $4100 per oz before rebounding to circa $4,400. The TACO trade is back and with markets as volatile as ever, will traders be able to predict what will come forth from Trump’s media outlet Truth Social.