To The Moon

$S&P 500(.SPX)$ President Donald Trump’s latest market-shaking stunt on July 15, 2025, sent stocks tumbling when he claimed he had drafted a letter to fire Federal Reserve Chair Jerome Powell, only to backtrack 20 minutes later, stating there were “no plans” to replace him. The result? A classic V-shaped market reversal, with the S&P 500 dropping 1.5% before recovering to close up 0.07% at 6,263.26. This “Trump Always Chickens Out” (TACO) pattern has become a hallmark of his presidency, creating dip-buying opportunities for savvy traders. But how long will Trump’s provocations keep stirring volatility, and is the TACO Trade a reliable strategy? This report dives into the market’s reaction, the viability of buying these dips, and strategic investment approaches to navigate Trump’s drama while managing risks.

The Powell Drama: A 20-Minute Market Storm

On July 15, 2025, Trump escalated his ongoing feud with Powell, waving a draft letter to fire the Fed Chair during a meeting with House Republicans, citing a $2.5 billion Fed headquarters renovation as a potential cause. The market reacted swiftly:

• Initial Sell-Off: The S&P 500 fell 1.5% to ~6,170, the Nasdaq dropped 2.1%, and the Dow shed 400 points, with the VIX spiking to 20 from 15.94, reflecting investor fears of Fed leadership upheaval.

• TACO Reversal: Trump’s Oval Office clarification that there were “no plans” to fire Powell triggered a rapid recovery, with the S&P 500 closing up 0.07% at 6,263.26, the Nasdaq up 0.2%, and the Dow up 0.1%.

• Market Impact: The 20-minute chaos underscored Trump’s ability to jolt markets, but the quick rebound highlights the TACO Trade’s appeal—buying dips when Trump backtracks.

Social media sentiment on X was electric, with users calling it “another TACO Trade win” but warning that “Trump’s unpredictability could burn dip-buyers if he follows through.”

The TACO Trade: A Historical Pattern

The TACO Trade, coined by a Financial Times columnist, refers to Trump’s pattern of making bold threats—on tariffs, Fed policy, or geopolitics—only to retract them, creating buying opportunities. Historical examples include:

• April 2025 Tariff Pause: Trump’s Truth Social post urging investors to “buy” preceded a 90-day tariff pause, sparking a 9.5% S&P 500 surge and a 12% Nasdaq rally, per Reuters.

• March 2025 Tariff Walkback: A 5% S&P 500 drop on tariff fears reversed with a 25% recovery after Trump delayed duties, per The New York Times.

• 2024 Powell Threats: Trump’s earlier attacks on Powell for not cutting rates led to short-term volatility but no lasting damage, with markets rebounding as threats fizzled.

The TACO Trade has worked due to Trump’s tendency to back down under market or political pressure, but analysts warn it’s not foolproof:

• Bull Case: The market’s resilience, with the S&P 500 up 6% YTD through July 7, 2025, suggests dip-buying remains effective, especially with retail investors piling in, per Fortune.

• Bear Case: A Powell firing could trigger a “brutal” market reaction, collapsing currency and bond markets, per Deutsche Bank, with Polymarket estimating a 19% chance of ouster.

Is Buying the Dip Reliable?

The TACO Trade’s reliability hinges on Trump’s predictability in retreating:

• Historical Success: Retail investors who bought dips during Trump’s tariff threats in April 2025 netted significant returns, with the S&P 500 climbing 25% from its April 8 low, per The New York Times. Goldman Sachs noted that longer-term investors scaled into the S&P 500 at 5,000, with aggressive buying in the mid-4,000s.

• Market Conditioning: Investors are increasingly desensitized to Trump’s rhetoric, treating it as noise, with the VIX dropping back to 15.94 post-reversal, per market data.

• Risks of Overconfidence: If Trump follows through on firing Powell, markets could face a deeper correction, with a potential 5-10% S&P 500 pullback to 5,800-6,000, per Deutsche Bank. Legal challenges and Fed independence concerns could amplify volatility.

• Macro Context: With June CPI at 2.33% and a 70% chance of a September 2025 rate cut, per futures markets, a Powell ouster could disrupt monetary policy, pressuring stocks.

The TACO Trade offers short-term opportunities, but its long-term reliability is uncertain if Trump’s actions escalate beyond rhetoric.

Trading and Investment Strategies

Short-Term Plays

• Buy S&P 500 ETF (SPY) on Dip: Enter at $610-$614, target $630, stop at $600. A 3-5% gain if Trump’s walkbacks continue.

• Buy Financials on Dip: Grab JPMorgan (JPM) at $175-$180, target $190, stop at $170, for a 5-8% gain if bank earnings beat expectations.

• Options Straddle: Buy $614 calls/puts on SPY or $180 calls/puts on JPM for volatility around Trump’s statements or earnings.

• Tech Play: Buy NVIDIA (NVDA) at $150-$155, target $190, stop at $140, for a 18-27% gain if AI momentum holds.

Long-Term Investments

• Hold Defensive Stocks: Buy UnitedHealth (UNH) at $300, target $436.83, for 40% upside and 2.8% dividend yield, as a buffer against volatility.

• Diversify with Tech ETF (XLK): Buy at $200, target $220, stop at $190, for broad tech exposure.

• Hold Consumer Staples: Buy Procter & Gamble (PG) at $165, target $190, stop at $155, for 15% upside and stability.

Hedge Strategies

• VIXY ETF: Buy at $15, target $18, stop at $13, to hedge against Trump-driven volatility.

• SPY ETF Puts: Use puts at $614 to protect against a 5-10% S&P 500 pullback.

• Gold ETF (GLD): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously optimistic about the TACO Trade, seeing dip-buying opportunities in Trump’s volatility but wary of a potential Powell firing. I’ll buy SPY at $610-$614, targeting $630, with a $600 stop, and JPM at $175-$180, targeting $190, with a $170 stop, betting on bank earnings and Trump’s walkbacks. For diversification, I’ll add NVDA at $150-$155, targeting $190, with a $140 stop, for AI exposure. I’m hedging with VIXY at $15, targeting $18, and keeping 20% cash to seize dips if tariffs (30% on EU/Mexico, 35% on Canada) or geopolitical tensions (Israel-Iran conflict) escalate. I’ll monitor Trump’s statements, Q2 earnings, and Fed developments for cues.

Key Metrics

The Bigger Picture

Trump’s July 15, 2025, threat to fire Powell triggered a V-shaped market reversal, with the S&P 500 recovering from a 1.5% drop to close up 0.07%, reinforcing the TACO Trade’s appeal. Historically, Trump’s walkbacks, like the April 2025 tariff pause, have created dip-buying opportunities, with the S&P 500 gaining 25% post-dip. However, a Powell firing could disrupt markets, with Deutsche Bank warning of currency and bond market risks. The TACO Trade’s reliability hinges on Trump’s retreat pattern, but escalating actions or tariff impacts (30% on EU/Mexico, 35% on Canada) could trigger a 5-10% S&P 500 pullback. Investors should buy dips in SPY, JPM, or NVDA for short-term gains, diversify with defensive stocks like UNH, and hedge with VIXY or GLD to manage risks. Trump’s drama is a trader’s playground—play it smart to win big.

Are you buying the dip on Trump’s drama? How long will the TACO Trade last? Share your strategy below! 🎁

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