Editor’s Note: Monument Traders Alliance’s Bryan Bottarelli is a master at trading volatility – and lately, President Trump has been a master at creating it.
Below, Bryan explains how markets are noticing a pattern in Trump’s policies… and how traders can use it to their advantage.
For more insights from Bryan and the MTA team, check out their website.
– James Ogletree, Managing Editor
Donald Trump’s erratic behavior on tariffs has caused wild fluctuations in the markets over the last 3 months.
Now as we cross the 6-months point of his second term, a familiar pattern is starting to form.
Trump recently announced a 50% tariff on the EU starting June 1. Only to walk it back after he received a “very nice call” from European Union President Ursula von der Leyen, which quickly repaired the Nasdaq’s 1.5% drop.
He also dropped his 145% tariff on China to 30% last month, which again sent stocks surging.
This has been the pattern with Trump so far.
Despite his threats, he’s never followed through on his most bombastic tariffs. He prefers to announce them and then pause them.
It’s leading to what traders are calling the TACO effect.
It stands for… “Trump Always Chickens Out.”
See the chart below.
As you’ll notice above, there have been three “TACO” moments where Trump paused tariffs over the last few months.
Each time the pause is announced, the markets go back up.
You’ll also notice the pauses haven’t had as abrupt an effect recently as they have had back in March.
Once Trump makes the announcement for tariffs, I’ve been looking to overreactions.
So far, this has been a winning proposition. A few weeks ago I closed 3 trades for winners for a 100% win-rate, including a 16% winner on DECK in 1 trading day.
I understand these short-term fluctuations can be stressful as a trader, but the truth is… you can work overreactions in your favor if you know where to look. I do this in The War Room every day.
Trump’s Other Big Promise on Oil
Aside from tariffs, one of the other things Trump’s promised is we’d make a crap ton of money in the oil business.
He also promised a crap ton of money in the steel business.
Even if you don’t like Trump, we want him to succeed in this way.
Right now, the price of oil is around $64 a barrel. No oil stock is going to moon as long as oil prices are down.
However, as my colleague Karim likes to say, one of the best things for low oil prices is actually low oil prices.
Low oil prices force the marginal producers out of business. So long-term oil plays in companies that stand to survive any market storms could be the move.