Wall Street is detecting signs that the “TACO” playbook is underway.
“Trump always chickens out” – a reference to the president’s habit of backtracking on policies that shake markets – resurfaced last week when he extended a pause in attacks on Iran’s energy facilities to allow time for negotiations aimed at reopening the Strait of Hormuz, the region’s critical oil waterway.
“From a market structure perspective, this looks a lot like a classic ‘TACO’ dynamic in which Trump signals an escalation and then steps back when faced with the economic fallout,” wrote Daniela Hathorn, senior market analyst at Capital.com.
“That reinforces the idea that the US administration is actively seeking a way out, even if the path to get there remains unclear,” he added.
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Nancy Tengler, chief executive of Laffer Tengler Investments, said her team felt the administration was getting “a little tired” of the conflict and its impacts on markets heading into last week.
His firm purchased S&P 500 call options on Friday, March 20, positioning itself for a market rally ahead of Monday. The deal came to fruition when President Trump announced on the morning of March 23 that planned attacks on Iran’s power plants would be postponed amid “productive” talks, a reversal of threats made less than 48 hours earlier.
“This president pays attention to the stock market. He wants to win the midterm elections,” Tengler told Yahoo Finance. “I think he’s eager to put this behind him. And also, for the consumer, the tax refunds will now be offset by higher gas prices at the pump.”
Wall Street knows the TACO playbook well.
Last April, stocks and bonds plunged after Trump unveiled sweeping tariffs, then recovered when he halted the plan to negotiate with countries individually. The S&P 500 rose about 37% by the end of the year, hitting multiple all-time highs and extending gains into 2026.
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The TACO pattern is so familiar that analysts devised tools like BCA Research’s “Trump Weaknesses Index” to anticipate when a policy change might occur.
The indicator tracks short-term stock market movements, long-term Treasury yields, mortgage rates, gasoline prices, inflation expectations and the president’s approval rating.
Last week, the index hit about two standard deviations above the average, its highest level yet. That raises the question of whether a TACO measure this time can calm markets.
“You can TACO as much as you want, but a reversal of this indicator ultimately depends on Iran committing, and so far there have been few signs of willingness,” Ole Hansen, head of commodities strategy at Saxo Bank, wrote on Thursday.