Featured in Bloomberg Opinion: You Might Choke Gorging on the TACO Trade
- Absolute Strategy
- Jun 2
- 1 min read
TACOs for Everyone
Every so often an idea goes truly viral. A four-letter acronym always helps — think of Fear of Missing Out (FOMO), There Is No Alternative (TINA), or the BRICs (Brazil, Russia, India and China). Now it’s TACO — Trump Always Chickens Out — trade.
TACO philosophy goes beyond cynical traders. Absolute Strategy Research’s most recent quarterly survey of global asset allocators, responsible for trillions, found that they were truly “risk on” despite the apparent regime change in global trade. This is their composite optimism measure including the business cycle, profits, and inflation:
The optimism incorporates bearishness on the US dollar. The proportion expecting it to fall over the next year is the highest in the survey’s 10-year history:
They are also moving in a bearish direction on US inflation, which is still above the Fed’s target:
This is a strange combination. If the allocators are right about inflation, that would imply a serious failure for the Fed, to be met by higher rates, higher yields, and a stronger dollar. Implicitly, allocators seem to think the Fed will give up. That’s bad for the dollar, and sends money out of the US, but it’s not a problem for US equities.
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