TACO trades beat buy-and-hold under Trump presidency

Source: Trustnet

So-called TACO traders have made slightly stronger returns than buy-and-hold investors since Donald Trump returned to the White House but investors who sold into volatility and waited for markets to recover ended up significantly worse off, new analysis from investing platform IG shows.

TACO trading takes its name from the phrase ‘Trump Always Chickens Out’. The strategy rests on the belief that sharp market falls triggered by major political announcements have repeatedly been followed by rapid recoveries, as US president Trump softened or reversed his policies.

IG’s study modelled three investor types between January 2025 and March 2026, all starting with a £10,000 ISA tracking the S&P 500.

The TACO trader invested £6,000 on January 1 2025 and deployed the remaining £4,000 in £1,000 tranches, one day after each of four major tariff-driven market events. The buy-and-hold investor stayed fully invested throughout while the panic trader sold after each market decline and re-entered once conditions stabilised.

Over the study period, four events defined the pattern: Liberation Day (when Trump unveiled tariffs on the US’ trading partners), subsequent tariff pauses, escalating US-China trade tensions and tariff threats linked to Trump’s desire to acquire Greenland. Each triggered a pronounced dip followed by a rebound.

The TACO trader returned 18.2%, against 17.7% for the buy-and-hold investor, finishing with a portfolio value of £11,822 compared with £11,773. The outperformance was narrow, amounting to just 0.5 percentage points over 15 months.

Source: Bloomberg. Past performance is not an indicator of future results. Table shows market returns for three different investor profiles.  Market performance from Jan 1 2025 to Mar 16 2026

However, the panic trader, who sold after declines and waited for reassurance before re-entering, lost 1.4%, finishing with £9,860. That placed them up to 20 percentage points behind both other strategies.

Chris Beauchamp, chief market analyst at IG, said: “Market volatility around tariffs has created clear trading opportunities, and for active traders the TACO trade has become a recognisable pattern. Our analysis shows that it has been possible to outperform the market by buying into these dips but only marginally and only with consistent timing across multiple events.

“For many investors, that level of precision is difficult to achieve in practice. What the data clearly highlights is the risk of getting it wrong. Investors who reacted to market falls by selling out and waiting for reassurance before re-entering ended up worse off, missing key recovery periods that drive long-term returns.”