Australian financial markets are witnessing new retail-driven trading dynamics, reshaping global market reactions to U.S. President Donald Trump’s second term and geopolitical tensions. Political volatility is transforming into recognised trading patterns, with acronyms like “TACO” (“Trump always chickens out”) and “FAFO” (“f*** around, find out”) now reflecting retail investor behaviour. These terms encapsulate how investors lean into short-term swings driven by incessant news. Lale Akoner, global market strategist at eToro, notes, “Bull and bear are still the foundation, but ‘TACO’ and ‘FAFO’ are becoming part of the everyday language on trading desks.”
The “TACO” dynamic gained prominence in April 2025, when Trump’s sweeping import tariffs initially sent global markets into decline. As he paused for negotiations, some investors bet tariff fears were overblown, anticipating he would “chicken out” to avert deeper economic fallout. Subsequent rapid U-turns in military operations, including Venezuela and Iran, amplified this pattern. Investors are increasingly testing the administration’s tolerance for market stress. Deutsche Bank’s “pressure index” showed market stress reached its highest since Trump’s second term began, even as analysts anticipate a gradual de-escalation in conflicts like Iran.
Concurrently, the “FAFO” trade reflects investors’ growing willingness to absorb short-term pain for policy reversals. Traders react aggressively to geopolitical shocks, selling risk assets before repositioning once market stress hits a political threshold. This was evident during U.S. actions in Iran, where the 30-year Treasury yield jumped sharply, only to partially retrace. The period also saw a significant shift from gold, which retreated after a record high, towards oil. Brent crude futures soared to $126 a barrel amid the Iran war and Strait of Hormuz closure. Piotr Matys, senior FX analyst at In Touch Capital Markets, suggests “NACHO” (“Not A Chance Hormuz Opens”) could be gaining popularity, highlighting the “cross-asset whiplash” of conflicting market moves.
