Understanding Wall Street’s Response to Trump’s Policies

One of the notable memes during President Trump’s second term is “TACO,” which stands for Trump Always Chickens Out.

In April 2025, on Liberation Day, investors on Wall Street initiated what they call a TACO transaction. Essentially, they bought stock whenever the market dipped due to Trump’s announcement of new tariffs. Despite these announcements, the Trump administration often postponed or reduced initial tariffs, leading to market rebounds and providing investors with easy profits.

This meme gained traction, particularly during the Iran war, as traders continued to engage in TACO trades, even amidst Trump’s unpredictable threats regarding Iran. He might proclaim drastic actions one moment, then pivot to discussing potential breakthroughs in negotiations the next. If signs of peace emerge, the markets are quick to react positively.

However, some investors are starting to come to terms with the unsettling prospect that the Strait of Hormuz may not reopen anytime soon. This has led to a new perspective: “Holmes opens is not an opportunity,” or “NACHO.” This shift in sentiment presents challenges, not just for Trump but also for everyday workers facing economic pressures at home.

Confidence in a quick resolution to the conflict is waning. If the Strait remains closed, inflation could escalate significantly. This sets up a political dilemma for Trump: he may need to negotiate a peace deal, allowing Iran control over the Strait, which could infuriate hardliners and be viewed as a defeat. Alternatively, he could decide to escalate military actions—though doing so could lead to severe consequences and financial instability.

Interestingly, oil futures seem disconnected from actual market conditions, with physical oil prices soaring higher than the futures indicate. In some contexts, if Wall Street begins recognizing this real-world scarcity, it may positively affect calls for an end to the conflict. Through the tariff situations of April 2025, Trump responded to market fluctuations, sometimes easing pressures when stocks seemed on the verge of a crash. Despite hardliners pushing for greater confrontation, he may ultimately offer Iran concessions to prevent a total market collapse.

Regardless, this scenario foreshadows significant economic challenges ahead. The longer the Strait stays closed, the more pronounced the economic distress and price hikes will be for everyone involved. So far, Operation Project Freedom has failed to achieve its goals, leaving uncertainty about the regime’s future.

It seems safe to say that the era of aggressive posturing may be behind us.