The policy volatility of a potential second Trump term and the escalating conflict with Iran are fostering a new trading logic primarily driven by retail investors. From tariff disputes to hostilities in the Strait of Hormuz, a series of acronyms originating from internet slang—"TACO" (Trump Always Chickens Out), "FAFO" (F*** Around, Find Out), and "FOMO" (Fear Of Missing Out)—have permeated from social media into the daily vernacular of global traders. This signifies that retail investors are systematically translating political uncertainty into actionable short-term trading patterns. A global markets strategist at eToro commented, "While the tug-of-war between bulls and bears remains the market's foundation, 'TACO' and 'FAFO' are becoming part of the daily language on trading desks."
The essence of the TACO strategy lies in a systematic skepticism toward the execution of Trump's policies. In April 2025, Trump's announcement of comprehensive import tariffs on most international partners shocked global markets, leading to widespread declines in global equities and bonds. As Trump paused actions and initiated negotiations with other nations, some investors began betting that the tariff panic was overblown, anticipating he would back down to avoid deeper economic damage. This pattern reached a new extreme when U.S. military actions in Venezuela and Iran showed restraint, issuing threats of "maximum pressure" only to quickly reverse course. Investors are continuously testing how much market pressure the Trump administration is willing to tolerate. Deutsche Bank's "Stress Index," which aggregates short-term changes in approval ratings, inflation expectations, equity markets, and bond yields, indicated that market stress reached its highest level since the start of Trump's second term in March. Despite market fears of a prolonged conflict in Iran, analysts note that the baseline scenario still points toward gradual de-escalation, even as investors persistently test policymakers' tolerance for volatility.
If TACO is about "buying the panic," FAFO is more akin to "riding out the panic." This strategy represents a different approach: actively absorbing short-term shocks and waiting for a recovery rally following a policy reversal. Under this model, traders tend to react sharply at the onset of a geopolitical shock or policy escalation—selling risk assets and pushing yields higher—only to quickly reposition once market stress hits a perceived "political threshold." This logic played out fully during volatility related to the Iran war. The yield on the 30-year U.S. Treasury note spiked sharply at the conflict's onset, reflecting deep market concerns about inflation and fiscal prospects, before partially retreating as tensions eased. Recently, driven by inflation fears stemming from prolonged disruptions, global long-term bonds faced selling pressure, pushing yields to new highs again. This suggests investors are increasingly viewing long-term bonds as a "pain threshold" for policymakers—when yields surge sharply, it often forces policymakers to adjust their stance. However, the eToro strategist also cautioned that amid sustained geopolitical shocks, especially those exacerbating inflation and growth risks, markets could shift from rapid reversals to deeper, more prolonged repricing, thereby limiting the effectiveness of FAFO-style trades.
Cross-asset rotation is equally profound. Throughout 2025, retail investors flocked to gold as a safe haven, driving the metal's price up by 66% for the year—its largest annual gain since 1979—fueled by a confluence of factors including interest rate cuts, geopolitical conflicts, massive central bank purchases, and inflows into gold ETFs. However, after hitting a historic high near $5,600 per ounce in January 2026, gold retreated to around $4,500 per ounce as investors pivoted toward oil following Trump's seizure of then-Venezuelan President Nicolás Maduro and the outbreak of the Iran war. Oil subsequently became the new market focus. Since January, oil prices have nearly doubled, with Brent crude futures briefly touching $126 per barrel on May 1 due to shipping disruptions in the Strait of Hormuz caused by the Iran conflict. The divergence between oil and gold highlights a shift in investor behavior—a growing preference for energy-related assets over traditional safe havens. Although directional bets on oil worth hundreds of millions of dollars ahead of major Iran war announcements drew regulatory scrutiny, many retail investors continue to speculate on where the market's next pendulum swing will land. A senior FX analyst at In Touch Capital Markets quipped, "The new buzzword 'NACHO' (Not A Chance Hormuz Opens) might become the next popular term."
It is important to note, however, that under the interplay of these multiple forces, cross-asset "whipsaw effects" are intensifying. This refers to sharp and sometimes contradictory price swings across different asset classes due to investors' rapid reactions to policy signals. This dynamic means commodities like oil are increasingly driven by specific supply-demand factors, while traditional correlations between asset classes have become less stable. Safe-haven demand can surge abruptly amid tariff threats or escalating Middle East risks, only to dissipate quickly once equity markets stabilize. The eToro strategist warned that while crude oil and gold can hedge certain risks, persistently high oil prices could start feeding into inflation, thereby pushing bond yields higher. "That's when you would begin to see broader cross-asset pressure," they noted.
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