Trump's Stock Market Strategy: TACO Playbook Returns Amid Iran Conflict

Mar 30, 2026, 2:51 AM

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Wall Street is observing the resurgence of the "TACO" playbook, an acronym for "Trump Always Chickens Out," which refers to President Trump's tendency to retreat from policies that create market instability. This strategy became apparent last week when Trump extended a pause on military strikes against Iran's energy facilities to allow for negotiations aimed at reopening the Strait of Hormuz, a vital oil passage.

Daniela Hathorn, a senior market analyst at Capital.com, described the situation as a classic TACO dynamic, with Trump signaling potential escalation but stepping back when faced with the economic repercussions. This approach suggests that the US administration is actively seeking a diplomatic exit from the ongoing conflict, although the pathway remains uncertain.

Nancy Tengler, CEO of Laffer Tengler Investments, indicated that her team sensed a growing fatigue within the administration regarding the Iran conflict's effects on financial markets. In anticipation of a market rebound, her firm purchased S&P 500 calls on March 20, which proved profitable when Trump announced a postponement of planned strikes on Iran's power plants on March 23 amid "productive" talks. Tengler remarked, "This president—he pays attention to the stock market. He wants to win the midterms," underscoring the political implications of market reactions.

The TACO playbook is familiar to investors. Last April, markets experienced a downturn when Trump announced sweeping tariffs, but they rebounded when he opted to negotiate individually with affected countries. By the end of the year, the S&P 500 had gained approximately 37%, hitting multiple all-time highs and extending its upward trend into 2026.

Analysts have even developed tools like BCA Research's "Trump Pain Point Index," which helps predict when a policy shift may occur based on various economic indicators, including stock market movements and the president's approval rating. Recently, this index reached about two standard deviations above its average, indicating heightened market sensitivity and raising questions about whether a TACO move could stabilize financial conditions amid the Iran crisis.

However, as noted by Ole Hansen, head of commodity strategy at Saxo Bank, market stabilization will largely depend on Iran's willingness to engage with the US on diplomatic terms. So far, there have been few signs of readiness from Tehran, which recently rejected a US ceasefire plan intended to fully reopen the Strait of Hormuz. This stagnation has led to the continued rise of oil prices, which have surged over 40% since the outbreak of the conflict, while the S&P 500 has seen a decline of about 7%. Both the Nasdaq and Dow have entered correction territory, each down more than 10% from their all-time highs.

Trump himself remarked during a Cabinet meeting, "Frankly, I thought the oil prices would go up more, and I thought the stock market would go down more," reflecting his awareness of the market's dynamics amid the crisis.

With oil prices exceeding $105 per barrel and the 10-year Treasury yield on the rise, some strategists are focusing on safeguarding portfolios against potential inflation and increasing interest rates. Tim Urbanowicz, chief investment strategist at Innovator Capital Management, cautioned investors to be vigilant, suggesting that persistent high oil prices could lead to stubborn inflation. He emphasized the importance of caution, stating, "The longer oil prices stay elevated, the more the odds of inflation being sticky because of this go up.".

As the situation develops, all eyes will remain on Wall Street, where the interplay of Trump's TACO strategy and geopolitical tensions continues to influence market behavior.

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