Is the ‘TACO trade’ still a winning bet in 2026, or are investors about to get burned again?

Following the TACO process seemed to offer a way to benefit from the uncertainty created by the US president’s shifting approach to tariffs.

The US administration established a pattern that saw the imposition of high tariffs, creating panic in markets, before reversing course and announcing a pause on those tariffs, with Donald Trump able to report that the target countries had rushed to make a deal that would benefit the United States.

Wearisome global trade experts were forced to point out, repeatedly, that these rapid-fire deals did not constitute real trade agreements, which take years of hard negotiations, but markets did not care. They were simply glad to see that the prospect of damaging trade wars had been averted.

IG analysis of investor behaviour showed that buying tariff-driven dips would have narrowly outperformed a vanilla buy-and-hold strategy, though the approach would have required nimble footwork and nerves of steel to weather the volatility.

As ever, the data showed that markets do not reward panic. Investors who cut back their exposure on each dip and then waited until the market recovered would have suffered, losing 1.4% over the period.

Markets had forgotten what it was like to live with a US president determined to upend the established order of things. Four years of Joe Biden provided their own excitement, not least the surge in inflation that drove 2022’s selloff and then the subsequent blistering tech-led rebound.

Donald Trump is an entirely different beast, one more suited to the era of social media. Carefully crafted investment strategies were useless in the face of rapid policy changes.

But investors adapted, as they always have. The TACO meme was borne out of experience, learned firsthand as the returning president changed course seemingly on a whim. Investors have learned that Trump’s instinct for drama is matched only by a desire to avoid sustained economic turmoil.

Thus, over the course of 2025 they became attuned to the president’s mood, and so the selloffs caused by his policy pronouncements became less dramatic, and the recoveries less impressive.

2026 began relatively quietly, with the president distracted by domestic turmoil. But then came the Iran war, which caught investors off guard and resulted in a retreat for equities and a surge in oil prices.

This looked like the classic Trump playbook, if on a much bigger scale; unleash a surprise and then wait for a moment to reverse course. This is why markets have rallied so hard since the ceasefire and peace talks were announced.

So far, April 2026 looks very similar to April 2025; a market hit hard by surprises then rebounds. In 2025 this resulted in an extended rally that lasted into the year-end, as tariff disruption proved short-lived.

2026 might be different, however. There is a ceasefire, and the two sides still want to talk, but the destruction on the ground and the closure of the Hormuz straits have not gone away.

Markets might appear to be ‘looking past’ the disruption and uncertainty, as they did last year, but while Trump may be seeking an end to the war, the impact has yet to be felt in full.

No strategy ever works 100% of the time. The risk for markets is that 2025’s playbook will not work again in 2026. Mid-term years can be tricky too. There is still a lot that can go wrong. Investors enjoying their TACO feast may yet face indigestion later this year.

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Chris Beauchamp is the Chief Market Analyst at IG, he has been at IG since 2010. He has extensive experience in CFDs, futures, forex, commodities, margin policies, and market analysis.

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