Markets are piling up on a common bet: President Donald Trump will be back on the floor again. (It’s not called free TACO Tuesday.)
The Dow, S&P 500 and Nasdaq just had their best day since May 2025, rumbling on Tuesday largely due to a report (and half confirmation) that the White House is considering ending US involvement in the Iran war without reopening the Strait of Hormuz.
That would be a surprising result: The war does not appear to be over, and even if it were, Iran’s global economic conditions that continue to block the vital waterway would last for a long time – measured in years, not weeks or months.
Oil trade on the world market, and US crude and gas prices will remain high as long as the Strait of Hormuz is closed – no matter how much President Donald Trump announces “drill, baby, drill”.
You would think that would be bad news for the markets.
Still, the Dow rose more than 1,000 points, or 2.4% Tuesday. The S&P 500 was up 2.8%; and the Nasdaq, which had entered a correction last week, was up 3.8%.
The reason: FOMO from TACO, Wall Street’s acronym for “Trump is always Chickens Out.” Trump has been changing from time to time some of his most important policies and proposals in the economy, giving markets and leaving traders with big losses if they had the wrong end of the bet.
“They wake up every morning, go to bed every night, put their hands together, think, ‘This is great. All I have to do is be on the right side of the big ship, and everything will be fine,'” said Dan Alpert, managing partner of Westwood Capital.
In other words: Even if the markets don’t believe a word of what Trump says, it’s better to make money by giving him the benefit of the doubt than to lose money while ignoring him. Marketers aren’t just worried about TACO – they’re trying to take advantage of the situation.
Trump has repeatedly reversed course on many policies, including tariffs, Greenland, immigration and now Iran. It’s a lot for Wall Street traders to understand.
Over the years, Trump has proven to be an incredibly inconsistent politician. But there is no doubt that it works for him in some ways.
Sometimes he will run wildly different ideas or take different – and unique – positions in rapid succession, inviting people to hear and believe what they want.
A good example is how Trump talked about deportations in the 2024 campaign. At times he has deported the deportable mass of almost all undocumented immigrants, while at other times he has focused more on deporting the small universe of immigrants who have been convicted of violent crimes.
So, when podcast host Joe Rogan began to publicly break with Trump in the months after he gave him the crucial 2024 endorsement, Rogan said he didn’t know how far Trump’s impeachment would go.
“I really thought they were going to go after the criminals,” Rogan said — even though Trump has publicly talked about going further than that.
Trump also has a tendency to switch between different styles – almost seeming to offer new styles in real time.
When he held other political meetings in his first term, he would use them to measure the temperature of his base on a certain issue.
One of the biggest ways in which this manifested itself in his second term was Trump’s tariffs, which sometimes went up or down by a lot over a period of hours, depending on the reaction of the markets or other countries.
It was also on display during the Iran war. In early January, Trump urged the United States to help protesters if the Iranian government continued to kill them. But now, even as the killings continue, he refused to immediately confirm his red line.
It will be almost two months until Trump enters Iran. Except this time the stated goal was not what he saw at the beginning of January.
Regardless of Trump’s deliberately shifting rhetoric, the result is a president who has proven to be politically flexible but also veers wildly from one direction to another in ways that may be difficult for those around him to implement.
And few issues present more challenges to fulfilling his changing desires than the war in the Middle East.
Stocks started the day higher after the Wall Street Journal reported that Trump told aides that he would accept a deadlock without a solution to the problem. Hegseth, when asked about the report, gave a quiet confirmation during a press conference on Tuesday morning.
“I think other countries should pay attention when the president speaks,” Hegseth said Tuesday. “He proved he meant something. He’s pointing out: You might want to start learning to fight back.”
Later Tuesday, stocks rose further after Iranian state media reported that President Masoud Pezeshkian had issued a statement that Tehran was willing to end the war, in exchange for a security guarantee.
In an indication of how crazy the markets were on Tuesday, as rumors of the statement surfaced on social media, it wasn’t until late afternoon that Iranian media outlets finally reported the statement – which finally matched what Pezeshkian had been saying for weeks.
Markets can change tomorrow. But, for now, traders are getting ready for another TACO.
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