Why the "TACO Trade" Is a Bad Idea. Do This Instead.
One of the newest trends and acronyms in the investing world among retail investors is the "Trump Always Chickens Out" trade -- also known as TACO. It's built on a belief that President Donald Trump will back off on harsh policies after announcing them and that investors can profit by buying in to stocks at the "right" time as Trump changes his mind and markets react.Investors point to the pausing and reduction of tariffs as examples of this, with Trump's initial announcements spooking the markets and leading to reduced valuations, before things changed. The idea behind the TACO trade is to buy when that fall happens, since inevitably the president is due to back off from his harsh stances and the market will bounce back.I understand the theory, but I think it's flawed and comes with serious risks. Here's why I don't think you should do it and why there is a better strategy to deploy amid market volatility.Continue reading
One of the newest trends and acronyms in the investing world among retail investors is the "Trump Always Chickens Out" trade -- also known as TACO. It's built on a belief that President Donald Trump will back off on harsh policies after announcing them and that investors can profit by buying in to stocks at the "right" time as Trump changes his mind and markets react.
Investors point to the pausing and reduction of tariffs as examples of this, with Trump's initial announcements spooking the markets and leading to reduced valuations, before things changed. The idea behind the TACO trade is to buy when that fall happens, since inevitably the president is due to back off from his harsh stances and the market will bounce back.
I understand the theory, but I think it's flawed and comes with serious risks. Here's why I don't think you should do it and why there is a better strategy to deploy amid market volatility.
