The Indicator from Planet Money - Lunch with the man who coined TACO

Episode Date: July 22, 2025

Despite presidential saber rattling and huge tariff threats, the U.S. stock market keeps reaching record highs. Why?Today we sit down with the man who coined the acronym TACO (Trump Always Chickens Out) and chew through several hypotheses. (Over tacos, of course.) See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. On a summer's day, I met Robert Armstrong at a Mexican restaurant in Brooklyn. So should we order some tacos? Robert Armstrong writes for the Financial Times. He hosts the unhedged podcast, and we were there for one reason. I've been out three tacos. Robert is famous for this acronym he coined, Taco. Trump always chickens out.

Alpastor, grilled shrimp and fish. I got mushrooms, spinach and veggies. So you might remember Taco is basically this idea that Donald Trump threatens super high tariffs and also things like firing the chair of the Federal Reserve, but then he backs down on the more extreme policies

when the markets freak out. So for a while, Taco and I were the darling of tariff policy. And this is one explanation for why the stock market has been reaching new heights. despite a chorus of economists and many business leaders saying that President Trump's tariffs will hurt growth. This is the indicator from Planet Money, I'm Derryam Woods. Today on the show, why is the stock market doing so well? Aside from some recent bumps in the road, Wall Street seems to be shrugging off chaotic economic policymaking.

We chew the whole enchilada after the break. All right, here are our tacos. Thanks very much. These look beautiful. This is very self-referential. I enjoy this. It's like my own tiny version of that scene in being John Malkovich where he climbs inside of his own head and so forth. There are a few hypotheses for why the markets don't seem to be that spooked by steep tariff threats and savor rattling by Donald Trump anymore.

Away from the hot source in Molle, the FTs Robert Armstrong ran through a few of them. The first and possibly the most important is that the stocking market is not the economy. This is a chestnut. We always keep in mind when we're checking in on the health of the economy. So the economy is the sum of all our buying and selling and saving and borrowing and so forth. The stock market is something much more specific. It's a price that discounts the future profits of the publicly listed corporations. And those things can come apart. So the fortunes of companies like Target or Eli Lilly are part of the economy. But they don't say, about everything else, like sales at my corner store or whether nurses are getting jobs.

So the stock market is not the economy. It's also not the economy. It does cover a large swath of American businesses. So maybe it's that's a partial explanation. I'm not sure if I see it as the whole explanation. Yes. And when things are very bad or very good, the stock market and the economy tend to come together. In other words, in a great boom, everybody has a job, and is feeling good, and the stock market tends to be high. In a recession, everybody feels lousy, everybody's out of work, and the stock market is down. It's in those in-between periods that one can be tracking one direction while one goes the other. And that brings us to hypothesis number two, enthusiastic investors. In the short term, the market becomes very emotional, because it's made

of human beings who are emotional things. We kind of get good vibes. We get excited. Things are sort of tonic and bubbly and fun. Stock markets will go up even in an unrealistic way. So enthusiasm seems to be building on enthusiasm at the moment. Yeah, we are in what they call a risk-on period in markets. The vibes are good. There's a little fomo, too, a little fear of missing out. There's a flavor of that right now for sure.

I can buy. That's a big explanation. However, company earnings have been okay. Yeah. There are some fundamentals that could justify this. artificial intelligence, AI might indeed create a whole amount of new value that the U.S. is on the frontier of. Quite right.

In fact, just recently, we had the reports from some of our largest banks, J.P. Morgan, Citigroup, and the news so far has been really pretty good. You know, they sort of hemmed and hawed and said, we can't see the future, which, of course, they can't. But the hard numbers they put out suggest a pretty resilient economy. The fundamental picture. to me looks okay. What about whether Trump's policies will actually supercharge growth?

Corporate tax cuts are good for business investment, for example. What do you think? Let's start with deregulation. I'm in favor of it. That is helpful and hooray for it. We didn't see a lot of it in this particular budget bill, but to the degree you deregulate a somewhat over-regulate American economy, good news.

Second point, the budget bill itself, it creates, bigger deficits, right? And in general, for a while, deficit spending is quite good for markets. What is the government doing when it's doing deficit spending? It's taking dollars and it's shoving them into the economy. And it should come as no surprise that some of those dollars will show up in investors' pockets or on corporate balance sheets. So deficit spending, markets generally like it until the moment that they really, really don't like it, which comes when the debt becomes unmanageable, interest rates, start to rise, the country is either forced into austerity or has to inflate its way out of its

debts. That is on a day that we don't know sometime in the future. Until then, deficit spending markets like. So there is some wind puffing up the sales of the stock market. There is still the question of tariffs, though. There have been really big announcements that have been almost universally condemned by economists. In April, the stock market had fallen around 20% from its peak. Then Trump paused the biggest tariffs and markets recovered. And yet, the deadline for the big tariffs is coming up soon, August 1st, and Trump keeps announcing new tariffs. What does the market do? It doodles on.

What gives? Next hypothesis, my personal favorite. Markets don't believe the president. Okay. This is the Trump always chickens out hypothesis that he makes all this big... And this is why we got those tacos together. Yeah. Indeed. So this is this quite stupid acronym I came up with.

Don't be so self-effacing. Trump always chickens out. The idea is the guy talks big and then he doesn't follow through. And so far that's been the pattern. And the markets are basically saying, yeah, buddy, tell me another one. Right. And of course, this creates a risk, right? That at some point, maybe he does mean it. And, you know, I can't read the guy's mind. I don't know where that point comes or if it comes. tell you this, we're in a kind of weird dynamic or paradox, I would say, between, in the relationship between markets and the president, right? Where the markets not believing the president's statements make it more likely that those statements will turn out to be true because he's not

being cautioned by the markets. So he might actually go for it in the end, right? That's quite a paradox and really a reason to be a bit more cautious. I would think so. I would think so. I I mean, I don't know what's going to happen on August 1st, but the market is giving the guy quite a lot of leash right now. Well, Trump sometimes chickens out is not quite as catchy. Indeed. But I will say it's been a good bet so far, but, you know, any market trend has a beginning, a middle and an end. And the end sometimes comes up on you more quickly than you might expect. Taco Tuesday may be over soon.

Yeah. It's tariff Thursday, maybe. This episode was produced by Angel Carreras and engineered by Robert Rodriguez. It was fact-checked by Sierra Juarez. Kate Kincahatt edits the show and The Indicator is a production of NPR.