TACO Resurfaces! Trump Tells “Wall Street Shorts”: Lying Is Shameful but Useful

Original Source: Wall Street News

US President Trump once again triggered a massive global market shock with a social media post. Although his statement regarding a ceasefire in the Middle East was quickly denied by the involved parties, Wall Street still chose to “buy.”

This indicates that in the eyes of the market, the president’s fear of a market crash is more important than the truthfulness of his statements, and “unpredictability” itself has become a powerful medicine to curb short sellers.

کے مطابق CCTV News, Trump posted on social media on Monday, announcing a five-day extension to the deadline for bombing Iranian energy facilities, stating that both sides were engaged in “very good, productive dialogue” moving towards a “complete and thorough resolution” of the conflict. This statement instantly reversed market pessimism, leading to one of the most volatile trading days on Wall Street since the outbreak of the US-Iran conflict.

After the market opened, the S&P 500 index surged by up to 2.2%, marking its biggest gain since May, while the Dow Jones Industrial Average soared by over 1000 points intraday. At the same time, crude oil prices plummeted by over 13%, with Brent crude falling below the $100 mark, and the yield on the two-year US Treasury note retreated sharply from its high to 3.79%.

(Brent Crude Falls Below the $100 Mark)

However, less than an hour after the tweet was posted, Iranian officials came forward to deny that negotiations were taking place. This scene was identical to the one two weeks prior—when Trump had declared that “the war is completely over,” which also triggered a brief stock market rally and a drop in oil prices.

This recurrence forces Wall Street to confront a deeper question: What exactly is the market trading?

The answer is not peace, but Trump’s market bottom line. Investors interpreted this statement as a signal: the president’s aversion to market declines will ultimately prevent him from fulfilling his most extreme threats. Furthermore, Trump’s unpredictability has become a market stabilizer: it prevents bulls from chasing gains with full force and deters bears from shorting aggressively.

TACO Trade Reappears in the بازار

At 7:05 AM ET on Monday, Trump posted on social media, announcing a five-day extension to the 48-hour deadline for military action against Iranian power facilities, citing “very productive dialogue” between the sides that could lead to a “complete and thorough resolution.”

Upon the news, the market immediately reversed. Brent crude fell below $100 per barrel, dropping over 13% at one point; US stock futures jumped sharply; the two-year Treasury yield plunged 0.22 percentage points from its high to a low of 3.79%; European stocks and bonds also rebounded sharply from earlier losses.

After the US stock market opened, the S&P 500 index rose by up to 2.2%, its biggest single-day gain since May; the Dow Jones index surged over 1000 points intraday. However, as Iran explicitly denied that negotiations were ongoing, market gains began to fade. By the close, the S&P 500’s gain narrowed to about 1.2%, the Dow closed up about 630 points (1.4%), and the rally in the US Treasury market also subsided.

(Intraday Movement of Major US Stock Indices)

This scene is not unfamiliar to Wall Street. Two weeks ago, when Trump told media that “the war is completely over,” stocks saw an almost identical sharp rally, and oil prices experienced a similar pullback. That rally also failed to sustain itself.

According to media analysis, part of Trump’s purpose in making this statement was to reassure investors rattled by the war’s impact and to avoid another painful sell-off at the start of a new week. Last Friday, the S&P 500 had already recorded its longest weekly losing streak in a year.

Knowing the Doubtful Nature of the Remarks, Why Did Wall Street Still Surge?

For Wall Street, whether Trump’s statement is true may not matter. The market’s sharp rebound was not because investors blindly believed the president’s “ceasefire” claim, but because they saw it as an assurance: the president’s extreme aversion to poor market data will ultimately prevent him from taking more extreme military action.

Since its outbreak over three weeks ago, this war has put pressure on the global economy. The blockade of the Strait of Hormuz has cut off critical energy supplies, surging energy prices have brought new inflationary shocks, over $2.5 trillion has been wiped from global bond markets facing their biggest monthly drop in over three years. Meanwhile, the two-year US Treasury yield has risen by more than half a percentage point since the war began, further constraining the Fed’s room for interest rate cuts.

Tom Garretson of RBC Wealth Management said: “Trump has clearly been trying to suppress oil prices, but perhaps once again it was the bond market that forced him to change his stance.”

Marko Papic, Chief Strategist at BCA Research, said: “If this is not resolved in the next 7 to 10 days, we are facing a major shutdown of the global economy. Today’s statement shows that Trump realizes the real economy could fall off a cliff.”

Other analysis points out that the current trading logic resembles a Keynesian “beauty contest.”

Daniel Alpert, Managing Partner at Westwood Capital, noted that the market is not trading on facts, but on the expectations of others. Even if investors suspect it’s a lie, as long as they believe others will see it as positive and buy, they will follow suit.

Furthermore, Fear Of Missing Out (FOMO) is also a significant factor driving the stock market higher.

Steve Sosnick, Chief Market Strategist at Interactive Brokers, emphasized that no one wants to miss the rebound, and even a tiny bit of good news can trigger a strong market reaction. At the same time, stock traders are closely following the footsteps of oil traders; the plunge in oil prices provided a tangible benchmark for the stock market’s rebound.

What Does Trump’s Unpredictability Mean for Bears?

Trump’s unpredictability itself has become a distorting market stabilizer: it prevents bulls from chasing gains with full force and deters bears from shorting aggressively.

The judgment of Michael Kantrowitz, Chief Investment Strategist at Piper Sandler, might be the most accurate: “Truth depends on perception, and Trump’s unpredictability only increases uncertainty, which helps prevent otherwise confident bears from pushing the market lower further. All this unpredictability buys time for the market and prevents overconfidence—for better or worse.”

In Trump’s first year in office, the “TACO trade” became deeply ingrained, and buying the dip became market consensus. However, this Iran war is shaking that belief—hostilities continue to escalate, the Iranian leadership remains in control, and the Strait of Hormuz remains blocked.

Brad Conger, Chief Investment Officer at Hirtle Callaghan, said: “My concern is that this is no longer entirely within Trump’s control to call off, unlike tariffs which could be stopped at any time. Those who are encouraged by Trump responding to the market have misplaced confidence.”

Jordan Rochester, Strategist at Mizuho Bank, pointed out that the White House’s chaotic messaging has left market positioning in a difficult spot.

“The hardest part is not predicting the war’s path, but predicting the White House’s communication style and how much the market will react to it,” he wrote in a client note. “We are dealing with a confused market—unsure whether this is a credible signal that the endgame is near or just another ‘almost done’ performance.”

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