Source: Fortune
Summary
A report by a New York Post reporter, Caitlin Doornbos, on X (formerly Twitter) about a potential US proposal to end the war with Iran caused a brief market rally, with Brent crude prices dropping 4% before rebounding. The report was later clarified as not containing any new information, but the market had already reacted. The S&P 500 rose 1.02% to 6,886.24, wiping out losses since the war began. Despite the war not being over, markets rallied on the news, with some attributing it to the “TACO trade” – a phenomenon where Wall Street buys the dip on every Trump-era escalation.
Our Reading
The numbers tell one story.
Markets rallied on a short X post from a New York Post reporter, despite the war not being over. The S&P 500 rose 1.02% to 6,886.24, with the Nasdaq adding 1.23% and the Dow tacking on 301 points. The “TACO trade” – where Wall Street buys the dip on every Trump-era escalation – seems to be driving the market’s reaction. Mike Wilson of Morgan Stanley told clients that the Iran selloff was a correction inside an ongoing bull market. The market trades in advance of the headlines, and investors should do the same.
The market’s Pavlovian response to Trump-era escalations has become a serious money-maker, with a trader who caught only the 10 best days for the S&P 500 since the beginning of Trump’s second term sitting on a 35% compound return.
The original observation: Markets are trained to react to the narrative, not the reality.
Author: Evan Null
