Is Every Day TACO Tuesday?
I wish it were because I love Mexican food. Over the years, I’ve been to Santi’s on upper Meeting Street so often that I may be at least its minority shareholder by now. If you haven’t heard, “TACO” stands for “Trump Always Chickens Out.” Before you send the Sopranos to James Island to rough me up, know that I didn’t coin this term. I read it in Barron’s. Since then, the “TACO trade” has gone viral. It means that whenever the president’s policies rattle the stock or bond (particularly) markets he’ll reverse himself or at least dial back his rhetoric. Then we’re back to making money again. Case in point: In just four trading days after “Liberation Day (April 2),” which was when Trump’s tariffs were formally announced, the S&P fell -12%. Then the president served us a TACO by delaying the implementation of those tariffs and stocks started to claw their way back. A pattern has emerged with more instances of such turnarounds and we’re not even into June.
The White House can’t just act alone, so Trump really twists the arms of Congress, the Fed (our central bank the Federal Reserve Board), and even of justices far and wide all to further his agenda. The Congress controls fiscal (taxing and spending) policy. The Fed oversees monetary policy (fighting inflation and boosting employment by raising its benchmark interest rate in the first case and lowering it in the second). The judges are supposed to make sure that all this happens in accordance with the US Constitution. The US Supreme Court, and the 31,700 state and federal judges who funnel some decisions to Chief Justice John Roberts and Co., are supposed to referee any disputes over the Constitution’s interpretation. There are a lot of moving pieces here as US governance is being redefined. For better or worse, this has and should continue to impact investors. You could see this as an opportunity or a threat. I’m a trader (more so these days) so I’m optimistic. I’ll have even more chances to buy oversold stocks and to sell overbought names. I primarily traffic in inherently volatile tech stocks so these trades come at me fast.
At least for the past decade or so, tech stocks have dominated the US market. I calculate that although there are 11 economic sectors that comprise the S&P 500 almost 50% of the weight of this index is in tech or “techish” names. An example of the latter is Amazon. It’s formally in the Consumer Discretionary sector with other retailers, but the company wouldn’t be worth $2.2 trillion to investors if it were valued like your neighborhood convenience store. As a young man, a boss asked me to cover tech. It wasn’t my idea, but I parlayed that into a career investing in it and talking about it on TV.
Tech drives stocks and AI (Artificial Intelligence) drives tech. At least that has been the case since ChatGPT was introduced in late 2022. The bloom looked to have come off the rose last January when the Chinese DeepSeek model was introduced. It was so much less expensive to “train” (i.e., develop) that the billions that the leading American “hyperscalers,” including Meta, Alphabet, Amazon, and Microsoft, had been spending on AI infrastructure, like specialized semiconductors and servers that had filled huge AI datacenters, had been a waste, or it at least looked like those investments would never earn a reasonable return. To put this in perspective, global AI infrastructure spending was $455 billion in 2024 which was +51% from $301 billion in 2023. So much for a spending slowdown because it’s expected to rise another +30% in 2025. Some compare this mania to building out the Internet in the 1990s, or even to investing in the electric grid beginning in the late 19th century. We’ll see. In the meantime, I’ll keep riding this wave. Any short-term crisis has been averted.
Tune back in next month. I can only guarantee crazy between now and then.
