Five killer charts: The Taco Trade

Good morning – here are your five chart for the day. Each one comes snap stat, quick take and why it matters. Skim, steal, forward (but always credit!!).

CHART 1 • S&P 500 rallies on ‘Taco’ climb-down

There’s a new trade in town called "Taco". It stands for Trump Always Chickens Out. It has fuelled a bizarre market rally up until recently, as investors bet Trump will back down from his extreme trade policies. What you see here is the US Economic Policy Uncertainty Index spiking, while equity and credit markets remain relatively unfazed.

Snap stat – The Policy Uncertainty index surged past 500, which has not been seen since the pandemic.

Quick take – Markets at betting Trump will back off, pricing zero fallout from trade wars, which is unrealistic.

Why it matters – This disconnect between what is happening and what markets think will happen, represents a build up in downside risk if it doesn’t pan out.

Steal-this-caption – “The Taco trade bets that “Trump Always Chickens Out”, but what if he doesn’t” #FiveChartsDaily

Source: Financial Times

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