When will Trump TACO again?
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When Trump's tough policies or rhetoric push US stocks, US bond yields, and energy prices to sufficiently extreme levels, the market begins to bet he will TACO. What conditions are needed for the next TACO?
According to Wind Chasing Trading Desk, Craig Chan, Nomura Singapore's Global FX Strategist, pointed out in research released on May 7: "In three notable TACO cases, when our indicator reaches about 3.0 standard deviations or higher, Trump will TACO. The higher the Z-score, the greater the pressure Trump feels to consider TACO."
As of May 7, this TACO indicator has dropped from 2.3 standard deviations on May 5 to 1.7 standard deviations. The trigger was falling energy prices after Iranian statements, declining US 10-year bond yields, and a rebound in US stocks. In other words, market pressure hasn’t reached the intensity that historically has “forced” Trump to step back.
In this framework, the most stable signal is US stocks, especially the S&P 500; next is the US 10-year bond yield. Energy prices aren't usually the core variable, but have become central in the US-Iran conflict. If the US-Iran stalemate is unresolved in the short term and oil and gasoline prices continue rising, the TACO reading could approach the critical zone again.
Near 3 standard deviations, Trump policy reversals are more likely
This indicator tracks not Trump’s frequency of statements, but the market’s pain level.
The framework chooses three types of assets: S&P 500, US 10-year bond yield, and energy prices (including spot Brent crude and US gasoline futures). The logic is straightforward: US stocks declining, long-end US bond yields rising, and energy prices rising are all seen as market pressure generated by Trump’s tough policies or rhetoric.
The three main samples all happened in the "Trump 2.0" period, and each had a clear shift in policy tone or actions:
- April 9, 2025, “Tariff Day”: Reciprocal tariffs receive a 90-day deferral;
- October 12, 2025: Trump pulls back from threats of imposing 100% extra tariffs on all Chinese goods;
- March 31, 2026: Trump hints the US will depart Iran within two to three weeks.
In all three samples, the TACO indicator showed extreme readings before and after the policy shifts. The rough line is: when near or above 3 standard deviations, the market pressure is enough to force Trump to change his statements or actions.
During tariff shocks, US stocks provide the hardest signal
The tariff event of April 2025 is the clearest sample in this framework.
Trump announced reciprocal tariffs on April 2, then implemented higher tariffs on some countries at 12:01am Eastern time on April 9. US stocks promptly plunged. Around 12:18pm that day, Trump approved a 90-day deferral for trade partners that hadn’t enacted retaliation and would face more than 10% extra tariffs. Risk assets then rebounded rapidly.
Before the reversal, the S&P 500 indicator Z-score peaked at 3.2 standard deviations on April 8, while the previous ten-day average was only 0.8. After Trump announced the deferral, the reading dropped to 0.6.
The 10-year US bond yield also signaled pressure, rising to 2.1 standard deviations on April 8. The reason wasn’t just tariffs themselves, but also worries about global trade and slowing growth, plus talk about overseas investors reducing their US asset allocations.
Energy prices were unimportant in this sample, with related Z-score negative before April 9. So, the most eye-catching signal was from US stocks, followed by US bond yields.
The tariff threat: S&P 500’s single-day drop was eye-catching
The second sample happened in October 2025.
On October 10, Trump announced 100% tariffs on all Chinese goods starting November 1. The market immediately traded the “new round of trade war”: that day, the S&P 500 fell 2.7%, the worst daily performance since April 10, 2025.
This time, the S&P 500 indicator Z-score jumped from near zero over the previous five days to 3.1 standard deviations on October 10. The 10-year US bond yield had already signaled pressure: a five-day average of 1.9, and a peak of 2.3 on October 6.
Energy prices remained sluggish, with related Z-scores negative. The framework’s picture is simple: it wasn’t oil prices pushing for concessions, but the S&P 500’s one-day reaction to the tariff threat being too severe.
On October 12, Trump posted on social platforms saying “don’t worry, things will get better.” The market saw this as a retreat from the 100% extra tariff threat.
The Iran conflict made energy prices the main variable
The third TACO sample differs from the first two.
The US-Iran conflict began February 28, 2026, subsequently energy prices soared, US stocks fell, US long-end yields rose. During the escalation, Trump threatened to “take Iran’s oil,” and said if an agreement couldn’t be reached soon, the US would destroy Iran’s power plants, oil wells, Khark Island, possibly even desalination facilities.
By March 30, the energy indicator’s Z-score rose to 3.9 standard deviations, noticeably higher than US stocks and US bonds. Simultaneously, S&P 500 was at 2.4, and the 10-year US bond yield at 2.0.
The key change was the Strait of Hormuz. Since the conflict began, Hormuz has mostly remained closed, making energy prices the source of overall market pressure. Oil and gasoline prices kept rising, eventually overriding the signals from stocks and bonds.
On March 31, Trump told reporters in the Oval Office that the US would leave soon, maybe in two weeks, maybe three. Market pressure subsequently eased, especially reflected in oil, gasoline, and stocks. The TACO indicator dropped from 3.9 on March 30 to 1.8 on April 17.
The current readings aren’t enough, but Iran risk remains
After entering May, pressure briefly rose again.
The TACO indicator climbed from 1.8 on April 17 to 2.5 on April 29 and stayed high around May 5, reaching 2.3 on May 5. Subsequently, Iran’s statement of ceasefire and Trump’s claim that there’s a “great chance” the war will end led energy prices to fall, US bond yields to decline, and US stocks to rise. By May 7, the reading fell to 1.7.
This is still some distance from the critical zone of 3 standard deviations seen historically. According to the previous three samples, the market still needs at least several trading days of significant pressure for the TACO signal to stand out again.
But the risk hasn’t disappeared. If the US-Iran stalemate can’t be resolved soon and high energy prices keep rising, broader market contagion could occur: oil pushes up inflation concerns, gasoline increases political pressure, US stocks and bonds react again. At that point, energy remains the core variable of this TACO round.
This isn’t an automatic trading button; false signals come from non-Trump factors
This framework has a boundary: not all market downturns are due to Trump’s policies or rhetoric.
On August 1, 2025, the S&P 500 indicator once surged to 2.8 standard deviations, mainly because the market was worried about the US macro outlook, including weaker-than-expected July jobs numbers and Trump’s tariffs on certain trade partners set to take effect August 7.
On November 18, 2025, the S&P 500 indicator also rose to 2.5, the reason being an AI valuation correction.
These types of pressure differ from “direct market volatility caused by Trump’s tough actions.” What TACO trading really wants to capture is the pain point generated by policy, not mechanically attribute all high volatility to the White House. In the current US-Iran conflict, if you want to forecast whether Trump will back off again, you shouldn’t focus on new statements—but on whether energy prices can push the overall reading back toward 3 standard deviations.
Risk Warning and DisclaimerThe market has risks; investment must be cautious. This article does not constitute personal investment advice and has not considered individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article apply to their situation. You invest at your own risk. ```