In the opinion of Mobeen Tahir, Director of Macroeconomic Research & Tactical Solutions at WisdomTree, this has been a year of acronyms in the financial markets.
“Everything started with MAGA: Make America Great Again. Occasionally, some have given it a satirical twist with MAGA: Make America Go Away, or MEGA: Make Europe Great Again. In fact, this year, the largest investment flows into European rather than U.S. assets have often accompanied this satirical view. In this list, of course, one must include DOGE: the Department of Government Efficiency. And, more recently, TACO,” notes Tahir.
According to him, this last term has been coined by Financial Times contributor Robert Armstrong, and it means Trump Always Chickens Out. And the acronym does not refer to Mexico, although that country does have some ties to it, but rather describes President Trump’s pattern of making bold political announcements, such as imposing tariffs or threatening the U.S. Federal Reserve, only to later backtrack and soften. For the WisdomTree expert, this has, of course, translated into significant market volatility.
“For Nasdaq 100 investors, TACO has meant a roller coaster, as can be seen in the chart below. For those inclined to trade tactically around these sharp market swings, there have been many opportunities to take positions in one direction or the other,” points out Tahir.
Nasdaq 100 Timeline
The chart highlights a selection of notable days when President Trump made hardline announcements (in red) and subsequently backtracked on those positions. “The typical reaction of the Nasdaq 100 has been negative in response to hardline announcements and positive after the subsequent reversals,” emphasizes Tahir. In his opinion, these are the most important moments of the year:
February 1: Trump signs an executive order imposing tariffs on imports from Mexico, Canada, and China. The Nasdaq 100 falls.
February 3: Trump announces a 30-day pause on his tariff threat against Mexico and Canada. The Nasdaq 100 reacts positively.
February 13: Trump announces plans for reciprocal tariffs. This is followed by a series of tariff threats against numerous countries. The Nasdaq plunges.
April 2: Liberation Day: reciprocal tariffs are announced. The Nasdaq 100 suffers a sharp drop.
April 9: A 90-day pause on reciprocal tariffs is announced. The Nasdaq experiences a strong rebound.
April 21: Trump threatens to fire Federal Reserve Chairman Jerome Powell.
April 22: Trump withdraws his threat to fire Jerome Powell.
May 12: The U.S. and China agree to a 90-day suspension of high retaliatory tariffs.
May 23: Trump threatens the European Union (EU) with 50% tariffs and threatens Apple with a 25% tariff on its products unless they are made in the U.S.
May 26: EU tariffs are delayed until July.
“One could argue that no one can predict what will come next regarding tariff announcements. But the real question is whether the TACO effect is still alive. Are there any interesting opportunities left for investors? One hypothesis is that the TACO effect may have ended because the markets have become immune to new and bold announcements from President Trump, knowing they will eventually be reversed or at least softened. While the opposite hypothesis is that political uncertainty is greater than ever,” notes Tahir.
His main conclusion is that the Nasdaq 100, often considered a proxy for the U.S. technology sector, has been greatly influenced by President Trump’s policy measures. “Regardless of whether investors support TACO trading or not, political uncertainty is likely to remain high. And if ultimately the focus shifts away from tariffs, perhaps corporate fundamentals such as earnings and economic data like inflation, labor market strength, and GDP will return to the forefront,” argues the expert.
For Tahir, perhaps then more traditional acronyms like FOMO (Fear of Missing Out), TINA (There Is No Alternative), and RINO (Recession in Name Only) will become relevant again. “In any case, something will continue to attract investors and will keep driving the Nasdaq 100, one way or another,” he concludes.
