From TACO to FOMO: How Retail Investors Turn Trump’s Market Shocks into a ‘Trading Manual’

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The policy reversals and geopolitical conflicts of Trump’s second term are giving rise to a new trading logic led by retail investors.

"TACO" (Trump Always Chickens Out), "FAFO" (F*** Around, Find Out), "FOMO" (Fear of Missing Out)—these abbreviations, originating from internet slang, have permeated traders’ everyday vernacular from social media. Retail investors are systematically transforming Trump policy uncertainty into actionable short-term trading models.

This trend is reshaping how markets respond to policy shocks. From tariff disputes to the Iran war, violent cross-asset price swings and rapid reversals create risks but also opportunities for those adept at reading the rhythm. Meanwhile, the divergence between oil and gold prices, and the repeated surges in long-term U.S. Treasury yields, are intensifying cross-asset correlation pressure.

TACO Trading: Buy the Dip, Bet on Policy Retreat

The core logic of the TACO strategy lies in systematic skepticism about Trump’s policy execution.

In April 2025, Trump announced broad import tariffs on most trade partners, causing global stock and bond markets to plummet. However, as the White House began negotiations with other countries, some investors started betting that the tariff threats were over-interpreted and believed that Trump would ultimately retreat to avoid deeper economic damage.

Subsequently, America’s rapid shifts in military action against Venezuela and Iran further reinforced this narrative. Investors are increasingly inclined to test how much market stress the Trump administration can truly endure. Deutsche Bank’s "stress index" — synthesizing changes in short-term approval ratings, inflation expectations, stock performance, and bond yields — shows that as of March this year, market stress has reached its highest level since Trump’s second term began.

eToro global market strategist Lale Akoner says: "Bulls and bears are still foundational, but 'TACO' and 'FAFO' are becoming part of the daily language on trading desks."

FAFO Trading: Absorb Pressure First, Wait for Policy Reversal

The FAFO strategy represents another approach: actively absorb short-term shocks, and wait for recovery trades after policy reversals.

In this model, traders tend to aggressively reduce positions in the early stage of geopolitical shocks or policy upgrades, driving risk assets lower and yields higher, then quickly rebuild positions once market stress hits a "political threshold."

During volatility related to the Iran war, 30-year U.S. Treasury yields surged sharply in the initial phase, reflecting deep concerns about inflation and fiscal outlook. As tensions partially eased, yields fell back, but have recently climbed to new highs amid a global sell-off in long bonds—reflecting the market’s ongoing pricing in of persistent geopolitically-driven inflation.

Investors increasingly see long bonds as the "pain threshold" for policy makers: rapid surges in yields often force authorities to soften their stance. However, Akoner also notes that in scenarios where persistent geopolitical shocks overlay inflation and growth risks, the market may shift from quick reversals to deeper and more prolonged repricing, thereby significantly limiting the effectiveness of the FAFO strategy.

FOMO, NACHO Trades Trend: Gold Ebbing, Oil Taking Over

Throughout 2025, retail investors poured into gold en masse to hedge uncertainty. Gold prices rose 66% last year, marking the largest annual gain since 1979, driven by rate cut expectations, geopolitical hotspots, central bank buying, and inflows into gold ETFs.

However, after gold prices reached a historic high of nearly $5,600/oz in January this year, funds began rotating to oil amid Trump’s detention of Venezuela’s then-president Nicolás Maduro and the outbreak of the Iran war, causing gold to pull back to around $4,500.

Oil has become the new focus. Since January, oil prices have nearly doubled, as the Iran war effectively blocked the critical Hormuz Strait, with Brent futures hitting $126 per barrel on May 1.

This divergence between oil and gold reflects a structural shift in investor behavior—the market is now prioritizing energy exposure over traditional safe havens. Piotr Matys, Senior FX Analyst at In Touch Capital Markets, sums up this trend with another emerging catchphrase: "NACHO"—"Not A Chance Hormuz Opens."

Notably, several directional oil trades worth hundreds of millions of dollars appeared before major announcements related to the Iran war, attracting regulatory scrutiny.

Cross-Asset Linkage: The Butterfly Effect of Volatility

The layering of these trading models is creating increasingly complex cross-asset interactions.

The so-called "cross-asset whip effect" refers to sharp flips in multi-market positions triggered by rapidly changing headlines. Commodity markets (especially oil) are more driven by supply-demand fundamentals, while traditional correlations between other asset classes are becoming less stable.

Akoner points out that risk aversion may spike suddenly due to tariff threats or Middle East risk, then quickly fade as stocks stabilize. The deeper risk, however, is that once high oil prices start feeding into inflation, yields may surge further. "Then you’ll see broader cross-asset pressure," she says.

With policy signals swinging and geopolitical context hard to predict, how far this retail 'trading handbook' can go remains the market’s biggest question.

Risk Disclosure and DisclaimerThe market carries risks, and investment requires caution. This article does not constitute personal investment advice and has not considered individual users’ specific investment goals, financial status, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Invest accordingly, at your own risk. ```