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Why the ’TACO Trade’ still matters for your portfolio

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Investing.com — Over the past 48 hours, the term ‘TACO Trade’ has been widely circulated on social media and even made it to the White House. TACO is an acronym for “Trump Always Chickens Out”, which suggests that despite his tough talk on tariffs, he will always back down in the end.

Trump was asked about the TACO trade on Wednesday, enraging the President. “… don’t ever say – what you said, that’s a nasty question,” Trump slapped back when asked about it.

Assessing Market Performance from the April Lows

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What’s in Today’s Report:

  • Assessing Market Performance from the April Lows

Futures are slightly lower following a night of mixed earnings and economic data.

Earnings after the bell were decidedly mixed with some positives (MCHP, DELL) being offset by negative results (NTAP, GAP) and earnings are slightly weighing on futures.

Economically, Italian CPI beat estimates (1.9% vs. (E) 2.0%), further increasing expectations for a rate cut.

Today focus will be on the Core PCE Price Index (E: 0.1% m/m, 2.6% y/y) and a weaker than expected number will be positive for stocks and bonds as it would push back on inflation concerns and make a Fed rate cut later this year slightly more likely.

The other notable events today include two more economic reports, Consumer Sentiment (E: 52.0) and the Chicago PMI (E: 45.0) and a few Fed speakers: Bostic (12:20 p.m. ET), Daly (4:45 p.m. ET).

Trump Branded With Embarrassing Nickname Over Tariff Confusion

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Wall Street is beginning to understand the president’s roller-coaster foreign trade decisions with the help of a trendy acronym: TACO—or “Trump Always Chickens Out.”

The TACO theory was coined earlier this month by Financial Times columnist Robert Armstrong, adding a catchy name to the practice of loading up on stocks when Donald Trump first announces the tariffs and then selling when he ultimately backtracks on enforcing them.

In a Wednesday note obtained by Market Watch, Sevens Report Research founder Tom Essaye insisted that Trump does, in fact, always chicken out. So far, that’s been true for enacting additional tariffs on Mexico and Canada, postponing his “reciprocal” tariff plan on dozens of countries after his “Liberation Day” announcement went south, delaying a tariff on imports from the European Union, and smashing his plan to fine China, temporarily decreasing tariffs on Chinese products to 30 percent from 145 percent. Click here to view the full article in The New Republic on May 28, 2025.

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Initial Thoughts on Tariff Suspension (Bullish, but not an All Clear)

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What’s in Today’s Report:

  • Initial Thoughts on Tariff Suspension (Bullish, but not an All Clear)
  • Credit Spreads Deterioration:  An Economic Warning?

Futures are sharply higher after the Court of International Trade invalidated the administration’s reciprocal tariffs.

The ruling means that most of the 2025 tariffs, including all the reciprocal tariffs and additional tariffs on China, Mexico and China, are suspended immediately.

Clearly trade headlines will dominate the news wires today in the wake of last night’s court decision, anything that is positive for tariffs will be negative for stocks and vice-versa.

Away from trade, there are several notable economic reports today including Jobless Claims (E: 230K), Revised Q1 GDP (E: -0.3%) and Pending Home Sales (E: -1.1%).  Again, the stronger the data (especially for claims and Revised GDP) the better for markets.

On the Fed front, there are a few speakers today and their commentary in the wake of tariff suspension will be notable (anything that implies sooner than expected rate cuts will be bullish).  Speakers today include Barkin (8:30 a.m. ET), Goolsbee (10:40 a.m. ET), Kugler (2:00 p.m. ET) and Daly (4:00 p.m. ET).

Finally, earnings remain important and names to watch today include COST ($4.25), DELL ($1.50) and MRVL ($0.44).

The ‘Trump always chickens out’ trade is the talk of Wall Street. Here’s one way to play it.

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Tariff threats may still offer near-term opportunity but won’t determine market’s next big move, strategist says.

Let’s hear it for the TACO trade.

Wall Street loves a catchy acronym, and the TACO trade, coined earlier this month by Financial Times columnist Robert Armstrong, has captured the mood as investors and analysts attempt to make sense of the roller-coaster market action that has followed President Donald Trump’s sweeping tariff threats and subsequent walk-backs.

It stands for “Trump always chickens out.” The idea is that investors have profited by buying the dip that has followed Trump’s tariff threats. Does Trump always chicken out on his tariff threats? So far, the answer is yes, said Tom Essaye, founder of Sevens Report Research, in a Wednesday note. Click here to view the full article featured in MarketWatch, published on May 28, 2025.

Get access to the full Sevens Report issue on this topic—plus two weeks of free, no-obligation market insights built for advisors.
📩 Start your trial here: click here.

Advisors at top firms like Morgan Stanley, Merrill, Wells Fargo, and Raymond James already subscribe. Ready to see why?
👉 Start your quarterly subscription here: click here.

 

The valuation is flawed by earnings per share

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The valuation is flawed by earnings per share: Sevens Report Co-Editor, Tyler Richey Quoted in S&P Global

S&P 500 valuations stumble on tariff uncertainty

While the forward P/E ratio is widely viewed as the best measure of a stock or index’s fair value, the valuation is flawed by earnings per share and assumptions of fair market multiples from Wall Street analysts, portfolio managers and strategists, said Tyler Richey, a co-editor with Sevens Report Research.

“So effectively, both sets of proverbial goal posts are constantly being moved amid earnings estimate revisions and shifting geopolitical and macroeconomic landscapes impacting multiples,” Richey said. “Specifically, when volatility picks up meaningfully, it is very challenging to recalculate multiples based on fluid fundamental changes impacting the markets.”

Also, click here to view the full article featured in S&P Global, published on May 20th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Moody’s downgraded U.S. sovereign debt

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Moody’s downgraded U.S. sovereign debt: Sevens Report Analysts Quoted in Investing.com

What the Moody’s downgrade means for markets

According to the latest Sevens Report, the move is unlikely to drive long-term market direction.

“Moody’s downgraded U.S. sovereign debt to Aa1 from Aaa. That downgrade boosted long-term Treasury yields, as some investors sold long-term Treasuries,” the analysts wrote.

Stocks opened lower Monday, but Sevens emphasized that the downgrade “revealed nothing new.”

But Sevens called the timing questionable: “Downgrading U.S. debt for larger deficits and rising interest costs is the financial equivalent to saying ‘water is wet.’”

Sevens said, “There’s been no dramatic deterioration lately,” and noted that speculative fears tied to potential legislation “don’t justify the downgrade.”

“The deteriorating fiscal situation hasn’t stopped stocks from rallying over the past few years and that’s unlikely to change anytime soon.”

Also, click here to view the full article featured on Investing.com published on May 20th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

What the Moody’s Downgrade Means for Markets (Two Important Charts)

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What’s in Today’s Report:

  • What the Moody’s Downgrade Means for Markets
  • Two Important Charts: Interest Expense and Deficits

Futures are modestly lower this morning as the S&P 500’s six-day rally is being digested amid a steadying Treasury market after the Moody’s downgrade of the U.S. last week.

There were positive trade war headlines out of Japan, Vietnam, and India overnight helping global stocks rally while economically, German PPI favorably fell -0.9% vs. (E) -0.5%.

Looking into today’s session, there are no notable economic reports in the U.S., however the Treasury will hold a 6-week Bill auction at 11:30 a.m. ET which could shed light on the market’s near-term Fed policy expectations, but barring any big surprise, the auction is not likely to move markets.

There are a handful of Fed speakers today including: Barkin & Bostic just ahead of the bell (9:00 a.m. ET), and Musalem in the early afternoon (1:00 p.m. ET). A “higher-for-longer” shift in Fed policy outlook has been priced in recently, so any dovish commentary out of the Fed officials would be well received.

Finally, some late season earnings will continue to be released today including: HD ($3.59), PANW ($0.41), TOL ($2.86).

Alleviate consumer-demand concerns and recession worries

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Alleviate consumer-demand concerns and recession worries: Tyler Richey, editor of Sevens Report Technicals Quoted in MarketWatch

U.S. oil prices settle at highest in 3 weeks as trade-war optimism eases consumer-demand concerns

U.S. benchmark oil prices settled Tuesday at their highest in three weeks, as trade-war optimism helped “alleviate consumer-demand concerns and recession worries,” said Tyler Richey, co-editor at Sevens Report Research.

A multiyear low in annualized U.S. headline inflation was also a “welcomed surprise that effectively poured gasoline on an already raging risk-on fire across financial markets since the better-than-anticipated outcome of the U.S.-China trade negotiations over the weekend,” he told MarketWatch.

A continued relief rally seems to be likely in the weeks ahead, with the $70- to $72-a-barrel range the “first logical upside price target for WTI,” said Richey.

Also, click here to view the full article featured on MarketWatch published on May 14th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Understanding the New Bullish Argument

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What’s in Today’s Report:

  • Understanding the New Bullish Argument

Futures are moderately weaker on digestion of the recent rally following a mostly quiet night of news.

There were no notable trade headlines overnight but President Trump did say they were “close” to a nuclear deal with Iran and that is pressuring oil (down 3%). Today there is a lot of potentially important economic data including, in order of importance:   Retail Sales (E: 0.1%), Jobless Claims (E: 229K), PPI (E: 0.2% m/m, 2.4% y/y), Philly Fed (E: -10.0) and Empire Manufacturing (-7.5).  Put simply, the stronger the growth data the better for stocks (pushes back against recession fears) and the lower the PPI reading, the better for stocks (pushes back against inflation fears).

There are two Fed speakers today including Powell (8:40 a.m. ET) and Barr (2:05 p.m. ET) but they commentary is expected to focus on regulation so it shouldn’t move markets.

Finally, there are some notable retail earnings to watch today: WMT ($0.57), BABA ($1.48), DE ($5.68).