MY HOT TAKES
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The market still believes in the “TACO” doctrine
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Trump’s tariff talk is more negotiation tactic than real policy
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Markets are pricing in a moderate outcome—not a worst-case
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Earnings season is a far bigger risk than people realize
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This summer is not one for investor complacency
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You can quote me: “Even an average 10% tariff rate will have economic implications, but anything beyond will have serious MARKET implications.”
Carry on, keep calm? I had a rare treat yesterday. I watched a good portion of the session from behind a news desk on live TV, where I co-hosted a 2-hour program. While trying to remember to smile and sit straight, I engaged in discussion after discussion about the markets, some cool stocks, the economy, the Big Beautiful Bill Act, and, of course tariffs. These were discussions with some of the industry’s brightest as well as my financial TV veteran journalist cohost. That would be a challenge at any time, let alone while the markets were undulating.
Traders were desperately trying to rush to the all-time high recorded just a few days ago, which was followed by a pullback a day earlier. Still there were other traders taking profits, and possibly others yet who were shorting stocks hoping for a breakdown. The market, after all, has had a fantastic run off 2025 lows set in April. It was a run to record highs while thumbing its nose at the very real threats to the economy and markets.
As we worked our way through the program rundown, which was the culmination of a flurry of activity by producers and journalists that started at noon the prior day and quite literally ran up to the minutes before we went live, things would inevitably change. Markets, the news, and the economy are not static! They would certainly not rest and allow us to run through our program without throwing us some fresh headlines, some Tweets, and some Truths (that is a Tweet from Truth Social). And with each bit of fresh information hitting the tape, markets reacted.
I often talk about the Fed and how it has its hands on the levers of the global economy as well as the markets. Those two things determine how cushy your retirement may… or may not be. So, yeah, the Fed is important. However at the moment, there are two other entities plying those all-important controls.
The past few sessions have been punctuated by the President’s renewed focus on trade negotiations. With the One Big Beautiful Bill Act signed into law, the President quickly turned his attention to the bevy of pending, draconian tariffs outlined on “Liberation Day” and in the many, what appear to be, hip-fired comments from Trump. Today was the deadline set for negotiations. With only three known deals in the can, it was no surprise that the administration extended the deadline to August 1st, announced over the weekend. On Monday, 14 letters were sent out–butcher’s bills, if you like–to some of the US’s top trading partners including Japan and South Korea. Presumably, the list included countries which were not cooperating.
The mailing campaign interrupted the continuation of last week’s equity party reminding traders of the very real threat of all-out trade wars and fantastically high tariffs. Still Monday’s losses did not give off panic vibes. Yesterday’s information stream included the President’s declaration that there would be no more extensions (no TACO Tuesday at the White House), and that copper (a vital industrial metal) may get a 50% tariff 😦, while pharmaceuticals may end up with a 200% (not a typo) tariff! 😮 All I can say is… … WOW. Still markets managed to close down only slightly, but as I said earlier with lots of intra-session ups and downs.
How can markets be right below all-time highs and behave orderly while facing such a potentially painful outcome from all this tariff nonsense? I can tell you that there is nothing in those potential tariffs that would be considered positive for stocks, so it very likely comes down to TACO. The acronym TACO, standing for “Trump Always Chickens Out”, was coined by Financial Times columnist Robert Armstrong in a May 2, 2025 opinion column titled "Unhedged." He used it to describe President Trump's recurring pattern of announcing tough tariff threats, like the "Liberation Day" tariffs, and then reversing course under market pressure. It has since become a rally cry of sorts. My less-pithy explanation is simply, Trump’s deal craft; it is how the President negotiates.
The President is not trying to sink American companies and squeeze American wallets into submission. It is therefore unlikely that we will end up with the current proposed tariffs, but rather something more palatable. The markets appear to have already given Trump permission to levy an average of 10%. But will the President be able to oblige the market in the tight time window that he himself created? Will US trade partners play along or will they choose to go to war?
Folks, these risks are still very, very real. Even an average 10% tariff rate will have economic implications, but anything beyond will have serious MARKET implications. Market implications as in… um, declines. Don’t lose focus on that.
This brings us to the second of the two driving forces in the market right now. Earnings season starts next week with the big banks. This season has the makings of a pivotal one. Earnings growth is expected to be far lower than in the past two quarters. That said, analysts have set the bar really low. A lower bar is easier to jump, but if it is missed, it can be catastrophic.
Stepping back, the frenzy of trade headlines that will likely lead up to the new, new August 1st deadline is likely to keep the markets in a state of nervous bullishness. Volatility is likely to increase in the weeks ahead. Looking beyond August 1st, it is probable that trade spats will continue through the remainder of the year. That said, a successful earnings season is, at this point, the only thing that can keep markets energized. Of course, that can change at any moment. My advice? Remember to smile, sit up straight, and as always, stay focused on the long game. 🎬
YESTERDAY’S MARKETS
Stocks closed modestly lower yesterday, still reeling from the Pen Pal, tariff notices from a day earlier, only made worse by Tweets and soundbites from the President. OBBBA is in the rearview mirror as the administration looks to close the chapter on tariffs–it looks like it’s going to be a long one. Volatility eased and Treasury yields gained. The Fed is extending its summer vacation through September.