The taco trade is currently the most popular feast on the market, but it still leaves a unique flavor in the mouth.
The word was coined by my respected colleague Robert Armstrong, which encapsulates Trump’s always-on idea, especially those related to his beloved trade tax, while dangerous assets have increased.
I admit with pain that Rob made such a witty and appropriate attitude before I thought about it, but he was purposeful. The key evidence is April 9, when the U.S. president "suspended" his so-called "liberation day" super tariffs a week ago. The details on the market were blocked, at least he was partially retrospective.
Trump then bets on Jay Powell, suggesting he will seek the defense of the Fed chairman. Again, the market spits and the president quickly distances himself from the whole idea.
The latest one is related to China. Negotiations on trade in Switzerland a week ago resulted in what Bank of America called “Geneva Prevention,” a commitment to imposing tariffs on China.
The final taco is the taco that really develops the market this week. U.S. stocks completed their recovery from their early April lows, actually removing all losses this year with very impressive gains, as if this madness had never happened.
"The rapid rebound means that stocks have shifted from a sharp slowdown in pricing to a price without macro damage to a trade war," Bofa added.
In a market that is rising against China, the huge relief on the market is too big to be ignored. This week generated a 4.5% return in the S&P 500, bringing it over 5,900. It was some kind of brief squeeze, argued,—when the negative bet ran out of juice and was forced to fall over—it felt like sour grapes. As Aviva investors point out, this sentiment is much darker than what the market suggests – for example, the measurement of economic uncertainty far exceeds the actual pressure of corporate bonds.
“I think it’s hard to say that the stock market is barking and we’re going to take the other side,” said Sunil Krishnan, head of multi-assets at Aviva Investors. "It's reasonable to think we won't go back to Liberation Day." Despite the defensive guardrails, he still encountered his contact with the stock.
Still, the market rise this week is similar to the joy of people now threatening to cut off your toes instead of your entire leg. About 30% of China's baseline levies are still in the places forecasted by economists at the beginning of this year. 10% of the world's "floors" are very high, giving the world's largest economy the highest trade tax since the 1940s. This provides meaningful upward risks for the decline in inflation and growth in the United States, without being widely touted as a real-life opportunity for domestic manufacturing in the United States.
"I've been managing for 36 years for 36 years. It's the weirdest gathering I've ever experienced," said Yves Bonzon, chief investment officer of Swiss private bank Julius Baer. "I understand the reason, but 5,900? Really? It seems like a bold call."
Our optimists sit on wonderful gains, and they are good for them. But investors in other parts of the United States are still upset about the doubts about the rule of law in the United States and whether they can withdraw from an overly large U.S. distribution without any obstacles or controls, if they want. This is the question that wealthy clients are asking Bangzong, who has been raising this question with me recently. “The conversation is about the return on capital, not the return on capital,” he said.
It was a fearful question, a matter of adventure a few months ago. Even if it is raised as a serious possibility, Trump will almost certainly eliminate chicken. But it is difficult to look at the long term from a world where the world is seen as a serious possibility. For many investors, tilting to Europe and Asia seems to be the only cautious option over time.
These cracks in the foundation are not the only reason for caution. It was revealed in January that the big tech stocks in the U.S. are famous seven-person stocks that have never been properly recovered from their shock. This means that jewelry in the US market (Big Tech) is a riskier proposition.
Deutsche Bank's Max Uleer wrote this week that he believes the taller buttons in the U.S. look fragile. "In the short term, we expect the recent performance of the S&P 500 S&P will continue, as U.S. companies are the biggest beneficiaries of tariff cuts," he wrote. "But the tariffs on U.S. companies are still greater than European companies. In the United States, political uncertainty remains higher than in Europe. In Europe, revenue momentum is still more favorable. Valuations are more favorable to Europe." He listed the others, but you get it.
The discord here is a fundamental doubt about the rule of law in the United States with RA-RA "just toes!" To say the least, Wangsheng is embarrassing. It is unwise to believe that any view is pious.
katie.martin@ft.com