TACO time

After espousing a series of threats so frightening they alarmed even the Easter bunny, President Trump agreed to a two week ceasefire with Iran in exchange for the Strait of Hormuz opening immediately.

A threat to upend modern geopolitics followed by a complete reversal? You know what that means: The TACO trade is so back, and the market spent the day in chaos.

• Crude prices fell nearly 15% to below $97 per barrel, the biggest single-day drop since 2020. That dragged down oil stocks like Exxon Mobil and Chevron, but travel stocks got a big boost.
• Government bond yields sank, while the dollar fell as the safe haven trade unwound.
• Bitcoin rallied to a three-week high on reports that Iran will charge tolls in cryptocurrencies for any ships passing through the Strait of Hormuz.
• Traders began pricing in a rate cut instead of a rate hike, a reversal of…the recent reversal.

Should you take a bite of the TACO?

As is usually the case when the TACO trade is in full swing, investors are left with more questions than answers. But that hasn’t stopped analysts from trying to predict the future.

Fundstrat strategist Tom Lee, for example, argued that the ceasefire means the market is at bottom, and will likely only go up from here. Meanwhile, Goldman Sachs senior trader Rich Privorotsky cautioned investors from getting too jubilant about the news, arguing that this ceasefire is fragile and may not hold, sending markets tumbling back into uncertainty once again. And some investors are already looking past the war, according to a note from JPMorgan, perhaps rushing over key questions too quickly.

What now?

Zooming out, it’s clear that the truce between Iran and the US is by no means the end of geopolitical chaos.

Since the ceasefire, Trump has already threatened 50% tariffs on countries “supplying military weapons to Iran.” Meanwhile, oil tankers going through the Strait of Hormuz were stopped today after Israeli attacks in Lebanon, according to Iran. On top of that, a Saudi Arabian pipeline was reportedly attacked this morning.

Even if Trump is chickening out, that doesn’t mean everyone else is.—LB