The TACO trade may doom the stock market Today when Trump announced the 25% tariffs on Japan and Ko

[human1234]

The TACO trade may doom the stock market

Today when Trump announced the 25% tariffs on Japan and Korea, markets had a relatively muted reaction. Even with the Trump administration stating that they’re raising tariff rates on other 12 countries this week, the S&P 500 didn’t even decline a full percentage point. 

The markets current reaction to Trump revamping his tariff talk pales in comparison to the -7% decline after announcing his Canada and Mexico tariffs and the further -12% drop after liberation day. Financial markets have begun to largely ignore Trump and his tariffs, pricing in the expectation that he will ultimately chicken out. 

Here’s the thing: Trump always chickens out *because* of the markets reaction. Whether it was his first term tariffs in 2018 or his walk back of the liberation day tariffs or his eventual decision not to fire JPOW, he always chickens out because of the stock or bond market. 

When the markets stop caring about Trump’s constantly changing tariffs and assume everything will be all right in the end, that’s a **very bad** thing for America. If the market continues to rally based on bullish sentiment while ignoring the possibility that Trump actually keeps the tariffs this time, it becomes a self fulfilling prophecy. He will move on to destroying something else while the tariffs slowly increase inflation and suppress profits. Then, if earnings start coming in negative and the GDP shrinks, the market could crash again like on April 3rd.

Edit: Not a bear. I own positions in VOO and SCHD.

[human1234]

https://www.reddit.com/r/stocks/s/7kqpUCoHGK

[human1234]