There is a trade that Wall Street has quietly perfected over the past year. It is not complicated. It does not require quantitative models or inside information. It requires only the belief — earned through repeated experience — that President Donald Trump will eventually blink. The trade has a name: TACO. Trump Always Chickens Out. Coined by Financial Times columnist Robert Armstrong to describe the pattern Trump exhibited during the tariff wars of April 2025, when stocks ripped back from “Liberation Day” lows after a sudden policy reversal, the TACO trade became the defining strategy of a market learning to live with presidential brinkmanship.
On Tuesday, April 7, traders got their latest opportunity to deploy it. And on Wednesday morning, the return arrived: a $1.5 trillion relief rally that added value to US equities in hours that it had taken weeks of geopolitical anxiety to erode. Five weeks of held breath exhaled from the US stock market in a single session. The instrument of relief was a two-week ceasefire between the United States and Iran, brokered by Pakistan and announced on Truth Social with less than two hours to spare before Trump’s own deadline.
The 24 Hours That Built the Rally
To understand the scale of Wednesday’s market reaction, it helps to reconstruct what the preceding 24 hours actually looked like — because they were, by the standards even of this conflict’s extraordinary volatility, genuinely alarming.
Trump set an 8 p.m. Tuesday deadline for Iran to reopen the Strait of Hormuz or face military strikes on its bridges, power plants, and what he described as its “whole civilisation.” He said it plainly, without diplomatic softening: entire infrastructure, entire civilisation, entire deadline. Markets do not easily price existential ultimatums, and for most of Tuesday, they did not try — they simply fell.
Pakistani Prime Minister Shehbaz Sharif spent the afternoon shuttling between Washington and Tehran, functioning as the diplomatic relay between two governments that were simultaneously threatening catastrophe and apparently seeking to avoid it. At approximately 6:05 p.m., less than two hours before the deadline, Trump posted his acceptance of the framework on Truth Social. The ceasefire was conditional on Iran reopening the Strait of Hormuz immediately. Iran’s Foreign Minister Abbas Araghchi confirmed Tehran would cease “defensive operations,” with safe passage through the strait “possible” for the next two weeks in coordination with the country’s armed forces.
By the time US markets opened Wednesday morning, the arithmetic of relief was already written in futures prices. S&P 500 futures had added 2.1%. Dow futures rose by 967 points. Nasdaq 100 futures climbed 2.3%. When trading began in earnest, the Dow surged more than 1,000 points. Oil — the single most economically consequential variable of the five-week conflict — plunged approximately 16%, falling below $100 per barrel for the first time since the war began, after having reached above $112 just days earlier. The final tally for the session’s equity value creation: $1.5 trillion added to US market capitalisation in a single day.
Why Markets Reacted So Violently in Both Directions
The scale of the rally reflects not just relief at the ceasefire announcement but the depth of the damage that five weeks of sustained geopolitical risk had inflicted on asset prices.
The Strait of Hormuz, through which approximately 20% of global oil flows in normal times, had been virtually shut down since early March. The energy crisis that followed affected not just oil prices but jet fuel, petrochemical supply chains, and the broader inflation expectations that influence interest rate trajectories and equity valuations. US national gasoline prices climbed above $4 per gallon. Airline stocks had been pummelled as fuel costs doubled. Global shipping had been thrown into disarray. The economic damage was distributed across sectors in ways that are still being tallied.
Against that backdrop, the prospect — even the uncertain prospect — of Hormuz reopening and oil prices normalising represented a genuine fundamental improvement in the outlook for corporate earnings across dozens of industries. The airline sector’s reaction on Wednesday was the most dramatic illustration of the mechanism: Delta Air Lines surged 12%. American Airlines jumped 11%. JetBlue added 9%. For carriers that had been haemorrhaging cash on doubled fuel bills, a $20 drop in oil prices per barrel in a single session was not just a market signal — it was a direct, quantifiable improvement in their operating economics.
The JPMorgan Signal and the Cash Waiting to Deploy
The institutional read on Wednesday’s rally was perhaps best captured by JPMorgan’s trading desk, which moved to a “Tactically Bullish” positioning on the session, telling clients the ceasefire “should trigger a re-risking potentially similar to the post-Liberation Day pivot.” The reference to Liberation Day — the tariff shock of April 2025 that sent markets sharply lower before Trump reversed course — was precise and intentional. JPMorgan was explicitly drawing a parallel between two moments of peak presidential escalation followed by rapid de-escalation and the market recoveries that followed each.
The parallel also illuminates why the rally was as large as it was. Approximately $8 trillion was sitting in money-market funds at the time of Wednesday’s session — capital that had been parked in safe havens by institutional and retail investors who had de-risked portfolios in response to the war’s uncertainty. The size of Wednesday’s move made clear that the constraint was never liquidity. Cash was available in enormous quantities. What was missing was a reason to redeploy it into risk assets. The ceasefire, however fragile, provided that reason.
Global X ETFs investment strategist Billy Leung captured the nuance in real time: “We’re effectively seeing a relief rally layered on top of a still fragile macro backdrop.” The qualification matters. The ceasefire did not resolve the nuclear question that remains the core sticking point between Washington and Tehran. It did not confirm that the Strait would remain open indefinitely. It did not repair the oil refinery and energy infrastructure damage that Middle Eastern producers had sustained during the conflict. It delivered two weeks of breathing room — and markets priced that two weeks at approximately $1.5 trillion.
What TACO Looks Like as a Trading Strategy
Not everyone was purely celebrating. The word “TACO” had migrated, by Wednesday morning, from a sardonic label for presidential inconsistency to a functioning analytical framework for professional traders.
eToro market analyst Zavier Wong articulated the sentiment that tempered the euphoria: “TACO is becoming less of a joke and more of a trading strategy across markets. Investors have seen enough last-minute pivots to know that a two-week deadline isn’t necessarily what it seems.” The observation cuts to the core of what Wednesday’s rally actually represented. Markets were not pricing a peace deal. They were pricing a pause — and pricing it at the historically observed rate of return for pauses under this president.
The TACO trade has its own internal logic. If Trump escalates and then de-escalates — as he did with tariffs in April 2025, as he did briefly with Iran in late March 2026, and as he did again on Tuesday evening — the optimal strategy for a market participant is to buy the fear and sell the relief. The sequence is predictable enough that JPMorgan can explicitly reference it in client communications. The unpredictability lies not in whether Trump will eventually soften his position but in when — and in whether each particular confrontation might be the one that genuinely does not resolve before the deadline.
Vice President JD Vance acknowledged on Wednesday morning that the truce was “very tenuous.” Semiofficial Iranian outlet Fars reported Tehran was “weighing deterrent operations” in response to what it considered ceasefire violations by Israel’s continued strikes in Lebanon. Peace talks in Islamabad were yet to begin. The two-week clock was already running.
Wall Street had just booked $1.5 trillion in gains. The next test was already being scheduled.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Source: Based on Fortune and publicly available information.
Disclaimer
This article is based on publicly available information, market developments, and credible media reports. The content is intended for informational and analytical purposes only and should not be considered financial, investment, or legal advice.