Bassanese Bites: The TACO trade – June 02 2025
Global markets
Global stocks rebounded last week, helped by a bounce in US consumer confidence as well as US President Trump’s decision to delay a 50% tariff on European imports.
Trump’s on-again, off-again tariff saga continues
Markets were whipsawed again last week after US President Trump threatened to impose a 50% tariff on European imports. The threat, due to apparently stalled trade talks, was quickly delayed until early July.
The same factors that caused markets to end the previous week on a negative footing helped fuel an early rebound last week. It’s also consistent with the “TACO” (“Trump Always Chickens Out”) theory now circulating in markets. Accordingly, markets are again taking Trump’s latest announcement of higher steel tariffs with a grain of salt.
A rebound in US consumer confidence also helped boost sentiment. This likely reflects easing fears of a US recession after Trump scaled back tariff threats in recent weeks.
Last but not least was the US Court of International Trade’s decision to rule against Trump’s ability to impose tariffs based on ‘economic emergency’ grounds. This optimism was quickly tempered, however, as the administration said it would appeal the decision all the way to the Supreme Court and/or use any number of alternative flimsy legislative excuses to impose tariffs.
The Fed: Comfortably on hold for now
In other news, minutes from the May US Fed meeting suggested the central bank still sees economic growth holding up well despite tariff-related inflation risks.
As a result, the Fed remains comfortably on hold for now. Indeed, resilient US economic activity has been helping to support the V-shaped equity market rebound since early April.
Despite the previous week’s concerns over the US budget outlook, US 10-year bond yields eased last week by 0.11% to 4.40%.
