"TACO Trading" Dominates the Market: Investors Bet That Trump's "Maximum Pressure Will Eventually Recede," Buying on Dips Becomes the Mainstream Strategy

ME News report, April 9 (UTC+8). As the U.S.-Iran conflict phase eased on a temporary basis, Wall Street gradually formed a set of trading logic centered on Trump’s policy style—“TACO Trading” (Trump Always Chickens Out). The market generally believes that Trump’s tough geopolitical statements often end in compromise, so viewing escalation of the situation is treated as a buy signal. Data shows that before Trump announced a pause in military actions against Iran, the market had already been positioning itself in risk assets. The S&P 500 logged its first weekly gain in six weeks, and the options market’s risk premium also stayed at a low level, indicating investors’ limited reaction to extreme scenarios. Institutional views suggest the market is repeating a cycle of “conflict escalation—sentiment under pressure—cooling of the situation—asset rebound.” Some analysts noted that systemic investors are in “possibly one of the most profitable opportunities environments in history.” However, there are also warnings that this highly aligned expectation may weaken the market’s ability to constrain policies. Once the market no longer produces a negative feedback to aggressive rhetoric, it may inversely incentivize riskier policy actions, increasing potential tail risks. (Source: BlockBeats)