President Trump’s unexpected follow-through on his August 1 tariff threat has rattled markets and sent a clear signal to investors: the so-called TACO trade—short for “Trump Always Chickens Out”—may no longer be a reliable thesis.
Trump signed off on a fresh round of tariffs Friday, with details that surprised both markets and strategists. Although the new import duties won’t take effect until August 7, the equity markets responded immediately, with broad-based selling accelerating throughout the trading session.
For RIAs and wealth managers, the takeaway is that relying on political restraint or delayed policy implementation as a backstop for market optimism is increasingly risky.
“The TACO trade may be out of runway,” said Michael Brown, senior research strategist at Pepperstone, referencing how investors had grown comfortable assuming Trump’s rhetoric would ultimately get watered down before action. “Markets are now waking up to the idea that this administration is prepared to follow through—even if it means market disruption.”
Art Hogan, chief market strategist at B. Riley Wealth Management, echoed that sentiment, noting that the new tariffs are not only firmer than expected but broader in scope. “No matter what adjustments we see going forward, the tariff ceiling is now materially higher than what was priced in,” Hogan said.
That shift in tone comes after months of investor complacency around trade tensions. Since Trump first floated sweeping tariff changes in April, markets had largely shrugged off the risk. The president’s decision to push the initial July 9 deadline to August 1 only reinforced the idea that rhetoric would continue to outpace actual policy.
However, Friday’s decision has disrupted that calculus.
“Trump may have been emboldened by the market’s resilience over the summer,” Brown noted. “Each time investors brushed off his tariff talk, it arguably gave him more latitude to escalate.”
That complacency, several strategists suggest, has now become a liability.
Back in July, co-head of asset allocation at GMO warned that without real pushback from the financial markets, Trump was unlikely to reverse course. “In the absence of the markets telling him to back off, he won’t,” he said.
Now that pushback may finally be arriving. Investors had been pricing in a best-case scenario, possibly mirroring the U.S.-UK trade framework with a manageable 10% tariff rate on most goods. Instead, the updated structure includes levies ranging from 10% to 41%, with higher-than-expected duties hitting countries like Switzerland and Brazil.
“This is the moment of adjustment,” said Hogan. “The market has to reprice around a more disruptive trade backdrop.”
Implications for Equities
While the tariff announcement delivered a near-term blow, the broader macro environment presents a mixed picture for advisors and investors alike.
Several seasonal and structural headwinds are at play:
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Seasonal Weakness – August and September are historically underwhelming for equities, a pattern that may be amplified by the current uncertainty.
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Lingering Trade Instability – The U.S. still lacks definitive trade agreements with key partners, including China. The continued absence of clarity is likely to weigh on investor confidence.
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Softening Labor Data – July’s employment report showed weaker-than-expected job gains, with downward revisions to May and June figures. Slowing job growth could suggest tariffs are beginning to bite into the U.S. economy.
Still, both Brown and Hogan maintain a constructive outlook on equities for the remainder of the year—assuming trade progress resumes.
“There’s still room for optimism,” said Brown. “Trump has indicated he’s open to further negotiations, and we know the administration is actively pursuing deals with multiple countries.”
Earlier this week, Trump posted on Truth Social that the White House was “very busy” finalizing trade agreements and claimed to be in active talks with numerous global leaders. Although no countries were named, the messaging suggests the door remains open for market-friendly developments.
Hogan also pointed out that the U.S.-China deal deadline, while vague, could be pushed back again, giving markets more time to adapt. “The president’s willingness to adjust timelines has been a consistent theme, and there’s no reason to assume that flexibility is gone.”
Fundamentals Remain Supportive
Despite the headline risk, many wealth strategists argue that equity fundamentals remain solid. Hogan is holding firm to his 6,500 year-end target for the S&P 500, implying roughly 4% upside from current levels. His view: while tariffs create noise, earnings, liquidity, and economic resilience continue to support equity markets over the medium term.
Brown shares that outlook. “Friday’s sell-off may have been an overreaction,” he said. “I’m still constructive on the broader trend, particularly given the underlying strength in corporate balance sheets and earnings guidance.”
For advisors building client portfolios, the current moment presents a challenge—but also an opportunity. The erosion of confidence in the TACO trade suggests that volatility could persist, particularly in internationally exposed sectors. However, long-term investors with diversified allocations may be able to use short-term dislocations to enter positions at more attractive valuations.
It also may be time to revisit hedging strategies or overweight U.S.-focused names with lower exposure to global trade frictions. Defensive sectors like healthcare and utilities—traditionally less sensitive to geopolitical swings—could provide a stabilizing force.
Looking Ahead
As the updated tariffs begin to take effect, RIAs should be preparing clients for a choppier path forward. While the White House appears willing to entertain future deals, investors should no longer assume that political pressure alone will steer policy in a market-friendly direction.
The key question now is how quickly new trade negotiations emerge and whether softer economic data begins to influence the administration’s tone.
In the meantime, equity markets may need to recalibrate around a more complex global trade environment—one where fundamentals take a backseat to political maneuvering, at least in the short run.
Still, Hogan and Brown agree: for investors with a long-term view, the market’s underlying trajectory remains upward, even if the road ahead gets bumpier. As Brown summed it up, “The bullish case is intact—but the playbook is evolving.”
