MW How the 'TACO' trade went from a light-hearted Wall Street joke to a serious moneymaker
By Joseph Adinolfi
Since the start of President Trump's second term, nine of the 10 top days for the S&P 500 have been spurred by de-escalation either involving tariffs or Iran
Investors are making a meal out of President Trump's tendency to back down on his own threats.
It started as a joke. But nowadays, nobody's laughing.
Over the past year, the "TACO trade," as many on Wall Street call it, has evolved from a humorous acronym, first popularized by a columnist with the Financial Times, into a major force in markets. As crude-oil prices soared in March following the start of the U.S. and Israel's assault on Iran, many on Wall Street credited hopes for a swift "TACO" from President Trump with helping keep a floor under the stock market.
Even as oil prices (CL00) (BRN00) soared, raising the risk that the U.S. could sink into recession - or that another spike in consumer prices could pressure the Federal Reserve to hike interest rates - the S&P 500 SPX never even made it into correction territory, described as a drop of 10% or more from a recent high. As of Wednesday afternoon, the index was off by about 1.2% since the start of 2026, FactSet data showed.
TACO, for those who aren't familiar, is an acronym popularized last year by Robert Armstrong, a columnist with the FT. It stands for "Trump always chickens out," andwas initially inspired by Trump's decision on April 9, 2025, to stage an abrupt about-face on tariffs - calling for a 90-day delay to make time for talks with U.S. trading partners.
See: The 'Trump always chickens out' trade is the talk of Wall Street. Here's one way to play it.
Undergirding the trade is the idea that Trump is more sensitive than his predecessors to big swings in financial markets - particularly those that could potentially impact Republicans' chances of maintaining control of Congress during the upcoming midterm elections. Trump has a reputation for treating the performance of the stock market as a barometer of his success as president.
MarketWatch looked back at the top 10 best days for the S&P 500 since Trump was sworn in to start his second term. By our count, during nine of these 10 sessions, gains were primarily driven by signs of de-escalation or compromise either pertaining to the White House's tariffs or the conflict with Iran.
While there is no hard and fast definition of what constitutes a TACO, several Wall Street professionals who spoke with MarketWatch for this story agreed with our list of nine specific events.
To be sure, as expectations surrounding a TACO have become more embedded, the payoff following more recent de-escalations has become more muted. When headlines hinting at a potential Middle East cease-fire landed shortly before the closing bell on Tuesday, the S&P 500 and the Nasdaq Composite COMP immediately leapt higher, erasing earlier losses, as investors bet that a TACO from Trump might be imminent.
"The muscle memory from the post-'liberation day' selloff is still clearly with investors," said Art Hogan, chief market strategist at B. Reilly Wealth, during an interview with MarketWatch.
That said, this time around, some strategists raised doubts about whether Trump would be able to convince other parties to the conflict - namely, Israel and Iran - to also de-escalate. As of Wednesday, Hogan said, whether the cease-fire would hold remained to be seen.
But to truly take advantage of the TACO, investors needed to be invested before the opening bell on Wednesday, Hogan pointed out. That is because U.S. indexes saw big gains out the gate that were quickly tempered by headlines raising questions about the durability of the cease-fire agreement.
"It is pretty well-documented that if you miss the 10 best days of any given year, regardless of who is in office, you're going to miss most of the upside," Hogan added.
Here's a breakdown of what drove markets during each of these days:
-- April 9, 2025: The original "TACO." Trump announced a 90-day pause for most of his "liberation day" tariffs after the bond market - in Trump's words - got "a little bit yippy." The S&P 500 rose 9.5%, scoring its biggest one-day percentage gain in more than 16 years.
-- May 12, 2025: Investors cheered as the U.S. and China agreed to a reduce tariffs on one another for 90 days. The S&P 500 gained 3.3%.
-- March 31, 2026: Stocks shot higher on reports that Iranian President Masoud Pezeshkian might be open to ending the war, with conditions. Trump also made comments about the war coming to an end within two to three weeks. The S&P 500 rose 2.9%, its best day in 10 months.
-- April 22, 2025: Comments from senior Trump administration officials hinting at a coming de-escalation in the U.S.-China tariff standoff helped drive a 2.5% gain for the S&P 500.
-- March 14, 2025: A lack of fresh comments from Trump about his tariff plans was enough to push the S&P 500 to its biggest daily gain since the day after Election Day, helping stocks recover some of their losses from earlier that week. "On a fundamental basis, President Donald Trump (aka Tariff Man) didn't tweet about tariffs today after doubling down on Thursday. ... Any day without a Trump tariff comment is a good day for the market," said Ed Yardeni, founder of Yardeni Research, in written commentary shared with MarketWatch at the time. The S&P 500 rose 2.1%.
-- April 8, 2026: This brings us to Wednesday, as investors cheered Trump and the Iranians agreeing to a two-week ceasefire, despite some worries that the fragile truce might not hold. The S&P 500 was up by more than 2% in recent trading.
-- May 27, 2025: U.S. stocks ended sharply higher after Trump said over Memorial Day weekend that he would delay the implementation of a 50% tariff on imports from the European Union. The S&P 500 rose by 2.1%, the best day in two weeks.
-- April 24, 2025: Signs of progress toward a trade deal with South Korea helped push stocks higher. The S&P 500 gained 2%, and exited correction territory.
-- Feb. 6, 2026: The lone session on this list where neither tariffs nor Iran played a major role in driving stocks higher. Instead, investors cheered the latest announcements from Big Tech companies about their plans for AI capital spending. The Dow Jones Industrial Average DJIA also crossed above 50,000 for the first time that day. The S&P 500 finished 2% higher.
-- April 11, 2025: Stocks rallied, with tech in the lead, as the Trump administration announced it would exclude semiconductors and other products from its reciprocal tariff regime. The S&P 500 gained 1.8%.
Since Inauguration Day 2025, the S&P 500 has risen 13%, according to Dow Jones Market Data. But if a trader had somehow only captured the gains from these top 10 trading sessions, they would be sitting on a compound return of about 35% as of Wednesday afternoon, according to calculations from Dow Jones Market Data.
To be sure, the concept of a TACO isn't exactly unique to Trump's second term. During Trump's first four years in office, investors seized on the concept of the "Trump put" - the idea that Trump would take steps to calm markets if volatility saw an aggressive pickup. Kim Caughey Forrest, founder and chief investment officer at Bokeh Capital Partners, told MarketWatch that the "Trump put" was credited with pushing Trump to strike a trade deal with China during his first term. That helped drive a big turnaround for the S&P 500 in early 2019 after the index nearly fell into bear-market territory.
Investors also learned time and time again that it rarely pays to be bearish over the long term. In 2022, expectations that aggressive interest-rate hikes by the Fed would trigger a recession caused stocks to log their biggest decline since 2008. But as it became more clear that a recession wouldn't materialize, stocks embarked on a roaring bull market that has continued through Wednesday. The bull market reached its third birthday back in October.
"I think what the TACO trade really does is it shows how people who are looking at the downside often are overestimating the risks," Caughey Forrest said.
U.S. stocks were sharpy higher on Wednesday, with many of the corners of the market that had been hit hardest in March seeing the biggest gains. The small-cap Russell 2000 RUT was up big, as were industrial stocks and consumer-discretionary names.
The S&P 500, Nasdaq Composite and Dow Jones Industrial Average were each sharply higher.
-Joseph Adinolfi
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 08, 2026 15:59 ET (19:59 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments