Calling someone “chicken” may look like an insult on playground, but it is exactly the label that some financial investors have started to get attached US President Donald Trump. THE “Taco” tradeAbbreviation of “Trump Always Chickens Out”, has gained ground in financial circles in recent weeks, while investors believe that each time the markets are starting to slip as a result of one of his political decisions, Trump tends to withdraw.
The jibe seems to have struck a nerve. When a journalist asked him questions about the reputation of the “chicken” this week, Trump bristled. “Oh is not so nice-I could go out. I have never heard that,” he said. The president later returned to the subject to criticize the “unpleasant” issue and insisted that he was not such a thing.
Policy reversals were the brand brand of the two and second terms of Trump. During the 2018-2019 commercial wars, he often threatened scanning rates only to water them during subsequent negotiation cycles.
A similar model emerged this year. In early April, the announcement of Trump’s “Liberation Day” sparked a strong sale, with the fall of the S&P 500 more than 12% During the following week.
However, as market volatility jumps, the administration has softened its positioned and has chosen to delay the prices for 90 days. As the pricing plans were softened, the markets rebounded. The index is now 4% higher than before the announcement and the increase 0.7%.
For supporters of the president, these political tours reflect his clever negotiation tactics designed to extract concessions or cajole of governments reluctant to conclude trade agreements. But for many investors, the model is less like a strategy and a retirement. And while the nickname Taco can look like an insult of playground, for financial investors, the Jibe has a real impact on the navigation of the financial markets.
Credibility is currency
When investors call a politician or a police decision -maker a “chicken”, it is not just a blow to their courage. It is a much more serious insult that questions their credibility. And in the financial markets, it is one of the most precious assets that a leader can have.
As a decision maker or politician, communicating successfully with the markets depends on confidence. Investors attribute capital to expectations of the future – inflation, trade flows, interest rates, budgetary expenses – and these expectations are influenced not only by what decision -makers do, but by what they say.
If a leader regularly threatens a scanning economic action but repeatedly fell back to the first sign of problem, his credibility begins to erode.
Once this doubt settles, it changes the dynamics. Investors are starting to ignore warnings while threats are brushed and the influence of political decision -makers loses its strength.
Erosion of the credibility of a leader among investors is probably initially to mitigate market volatility while investors are starting to ignore the words of politicians and decision -makers. They assume that the status quo will remain in place as a leader does not want or will not manage to provoke the changes they had initially proposed, resulting in little change in the financial markets. This weakens the ability of a leader to orient market expectations and, by extension, to the broader economy.
However, the Taco mentality could be dangerous if it is installed in the markets. Once investors start to assume that Trump is still flashing, they build their wallets around this expectation. The conversation on radical economic changes or significant increases in prices are starting to be ignored while investors look at risky positions in the conviction that climbing will be avoided at the last minute. It can create a false feeling of calm that only holds as long as Trump plays to type.
https://www.youtube.com/watch?v=kpe0z60k0ho
But the jibe “chicken” clearly angry the president. He may well seek an opportunity to change the minds of investors. If Trump decides to hold the line by pushing through rates without compromise even in front of legal actionor leave a dead end on the American debt ceiling Running hot, it could catch complacent investors offset.
The resulting rethink is likely to be clear and disorderly. Volatility could climb, not because Trump has changed, but because investors assumed that he would never, then reacts excessively when he does. In this sense, the true risk of Taco’s state of mind is not that he insults Trump – is that he causes an obstinate answer. A president who digs his heels and were born with risky policies despite all the warning signs would be bad news for the whole world – and the world economy.