Topline
Strategists at Deutsche Bank upped their forecasts for the leading U.S. stock benchmark this week as their optimism largely came from the idea of Trump backing down from his biggest tariff threats, a notion gaining steam on Wall Street and in Washington, earning Trump an unfortunate nickname.
The White House has dismissed the TACO nickname as “asinine” and “nasty,” but Wall Street is … More
Key Facts
The Deutsche Bank strategists led by Binky Chadha upped their year-end price target for the S&P 500 index to 6,550, indicating they believe the S&P can jump 10% this year to a new all-time high.
The upgrade was largely tied to the idea the White House has “already relented” on tariffs and there will be “further relents” on additional “economic or political pains,” hinting the trade policies weighing heavily on corporate earnings are likely to get even lighter.
Trade “escalations drive pullbacks, followed by relents which then spark rallies again,” explained Chadha, nodding to the stock market whipsaws surrounding Trump’s volatile trade rhetoric.
What Is ‘taco’ Trade?
The Deutsche Bank group rationale for stock gains reflects a growing consensus on Wall Street to not take Trump at face value on tariffs considering he has repeatedly backed down from his harshest trade posturing. That has led to the diffusion of the “TACO” tenet for investors, short for “Trump always backs down.” As Sevens Report founder Tom Essaye explains, the “trade is based on the idea that Trump makes an outlandish and significant tariff proposal on a major U.S. trading partner but within a matter of days, backtracks and either delays the implementation or exempts enough goods that the tariff itself loses much of its bite.” Trump has “always chicken[ed] out so far,” noted Essaye. Financial Times columnist Robert Armstrong is credited with coining the “TACO” term.
White House Pushes Back On Taco Nickname
Trump lashed out last week at a reporter for asking a “nasty question” surrounding the “TACO” trade and White House spokesperson Kush Desai slammed the term as an “asinine meme” in a statement to The Washington Post, but the term has gained popularity among Trump critics. On Tuesday, the Democratic National Committee parked a taco truck outside the Republican National Committee’s Washington office adorned with a poster of Trump in a chicken suit, according to Axios. “We have the lamest opposition in American history,” clapped back Vice President JD Vance.
Crucial Quote
“The past few months have been a constant tug of war between the Trump administration and foreign investors – or, as he likes to call them, ‘The Globalists’…. The Globalists have won this first round and are now showboating by calling the roaring market comeback the TACO trade,” Juan Manuel Correa, BCA Research’s chief strategist, global asset allocation, wrote in a Monday note.
Big Number
20%. That’s how much the S&P is up since April 8, when it closed at a 12-month low before Trump announced a pause on his most severe country-by-country tariffs announced the week prior. The index is still down 1% since Election Day.
