Wall Street has a new favorite acronym: TACO. “Trump Always Chickens Out” has become the shorthand for the President’s tendency to walk back aggressive trade threats when the stock market takes a dive. The recent cancellation of European tariffs following a sharp “dip” on Tuesday is the latest evidence of this trend.
This phenomenon was a primary driver for the S&P 500’s 0.5% gain on Thursday. By acknowledging the market’s pain and shifting his stance on the Greenland/NATO dispute, the President effectively signaled to investors that the “Trump Put” is back in play. However, the lack of a signed agreement keeps a layer of skepticism over the rally.
Adding a personal touch to the market news, JPMorgan Chase shares rose despite a lawsuit from the President. The legal action, which claims political bias in account management, seems to have been discounted by investors who are more focused on the bank’s fundamentals and the broader strength of the U.S. economy.
In Asia, the “Trump Factor” is being felt through the lens of trade stability. Markets in China and South Korea saw gains as the immediate threat of a wider trade war with Europe subsided. This allows regional investors to focus on local factors, such as the Bank of Japan’s interest rate path and South Korea’s Kospi nearly breaking the 5,000 barrier.
As the administration continues to use the stock market as a barometer for its policy success, volatility is expected to remain high. Traders are now watching for the next “big threat,” knowing that a 2% drop in the Dow might be all it takes to see a policy reversal.