The TACO Trade

Over the past few weeks, the most popular momentum trade on Wall St. has been dubbed, “The TACO Trade.” What is it, and how does it affect your portfolio?

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TACO stands for “Trump Always Chickens Out.” It was coined by a reporter at The Financial Times, and has become one of the most Googled terms over the past month. The rationale is that traders should buy any dip in stock prices based on tariff threats, because Trump will ultimately reverse himself and the stock market will go higher. But should you be following the TACO trade as well?

No. We should be avoiding all this noise. If you look at the chart below, we are in the same spot we were back at the end of February. In fact, there is no real strategy to "trade" stocks that has been shown to produce positive return over a long period of time. You may be able to get lucky a few times, but this is not how most people grow their wealth.

To be fair, there has been a lot of volatility in the stock markets based on trade policy. But none of it should affect how you are looking at your positions. Why? Because your financial plan was not based around trade policy. Your plan is based on your life, including your personal financial goals and situations. If the plan was a good plan, then stick to it. If you don’t have a plan, then it might be time to get one.

I would like to share a conversation I had in a recent client meeting. The client was concerned about market volatility, and that "this time is different." My response: “Here is how I look at it. For the past 100 years, betting on America has been a great trade. Going forward, I think it will continue to be a great trade for the next 100 years.”

Don’t chase the TACO Trade!!!