Stocks remained relatively flat this week as tariff uncertainty kept a lid on the market’s response to some good economic news.  Consumer confidence in May was much stronger than expected on optimism for trade deals, while the Fed’s favorite inflation measure, PCE, showed inflation unexpectedly dropped to 2.1% in April.

Wall Street analysts and journalists have been discussing something called the “TACO” trade this week.  “TACO” stands for “Trump Always Chickens Out”, referring to his history of backing off threats of huge tariff increases.  These threats have shocked the markets and triggered sharp stock declines, only to rebound when President Trump inevitably delays or lowers the threatened tariffs.  The TACO trade is buying stocks after the sharp market decline sparked by a tariff threat, confident that the president won’t follow through.  We’ve written about the Trump administration’s low tolerance for economic pain and the TACO trade is just a way to exploit it for investment gains.

President Trump became angered when he was told about this.  We’ll have to wait and see if his anger translates to a change in his approach to tariffs.

Have a great weekend.

Jack C. Harmon II, CFP^®, CIMA

Principal, Harmon Financial Advisors

Registered Principal, Raymond James Financial Services

 

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