Traders fear missing out on latest 'Trump TACO rally'

One thing became clear in Monday’s big market comeback: Traders don’t think this volatility will persist. The Dow Jones Industrial Average closed more than 200 points higher Monday, erasing an 886-point decline seen earlier in the day. The turnaround came after President Donald Trump signaled that the Iran war was nearing an end. The moves echoed those seen in 2025 after Trump unveiled sweeping tariffs on imports last April. Stocks initially moved sharply lower, with the S & P 500 tumbling more than 9% in the week of the “liberation day” announcement. The following week, the benchmark climbed more than 5% as the White House backed away from the most aggressive proposals. The index went on to reach record levels throughout 2025, with traders betting that “Trump always chickens out”, or TACO for short. .SPX 5D mountain SPX 5-day chart This time around, traders are betting that “Trump won’t allow conditions to dramatically deteriorate further” when it comes to oil prices and the Iran war, said Adam Crisafulli of Vital Knowledge. “The fear is much greater about missing the Trump TACO rally than there is about being caught long in the event of a further escalation,” he added. Crude prices soared above $110 per barrel this week before easing back to around $90. The Cboe Volatility Index (VIX) , Wall Street’s “fear gauge,” hit a high of 35.3 on Monday before closing at 25.5. Early Tuesday, the VIX was trading around 25.2. Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, told CNBC’s “Squawk Box” that such reversals were also seen after the Ukraine-Russia war began in 2022. “The market’s clearly decided to price the geopolitical historical precedent, which is this is going to be similar to Russia-Ukraine … where you begin to fade volatility,” she said. There’s only one wrinkle to this view, Silverman added: “It’s not up to us to say the war is over. … There’s obviously another actor who could continue to do damage to other countries in Gulf, to the Strait of Hormuz.” That’s Iran. Still, as long as there’s even a chance of another TACO trade playing out, investors will likely continue buying on dips.