TACO, FAFO, FOMO... These secret codes invented by retail investors are becoming a trading strategy in the Trump 2.0 era.

The policy uncertainty of Trump's second term and the ongoing escalation of the Iran conflict are giving birth to a new trading logic dominated by retail investors. From trade tariff disputes to gunfire in the Strait of Hormuz, a series of Internet slang abbreviations - "TACO" (Trump Always Chickens Out), "FAFO" (F*** Around, Find Out), "FOMO" (Fear Of Missing Out) - have penetrated into the daily discourse of traders worldwide, signaling that retail investors are systematizing political uncertainty into a tradable short-term trading pattern. eToro's global market strategist Lale Akoner commented, "The long and short game remains the market foundation, but 'TACO' and 'FAFO' are becoming part of the daily language of traders." TACO trading: Buy on dips, bet on policy retreat The essence of the TACO strategy lies in the systematic skepticism of Trump's policy execution. In April 2025, Trump announced comprehensive import tariffs on most international partners, shocking global markets and causing widespread declines in global stocks and bond markets. As Trump paused actions and began negotiations with other countries, some investors started betting that tariff panic was exaggerated, believing that Trump would choose to back down at the last minute to avoid causing deeper economic damage. Subsequently, U.S. military actions in Venezuela and Iran have calmed down, with threats of "maximum pressure" quickly reversed after. This pattern has been pushed to new extremes. Investors continue to test how much market pressure the Trump administration is willing to bear. Deutsche Bank's "pressure index" - which combines short-term changes in approval ratings, inflation expectations, stock and bond yields - shows that market pressure reached its highest level since the beginning of Trump's second term in March. While the market remains concerned about a protracted conflict with Iran, analysts point out that the benchmark scenario still points to a gradual easing, even as investors continue to test policymakers' tolerance for volatility. FAFO trading: Weather the storm, then bet on reversal If TACO is "buy in panic," FAFO is more like "survive through panic." This strategy represents another approach: actively absorb short-term shocks, wait for a policy reversal, and then position for recovery. In this model, traders tend to make strong responses in the early stages of geopolitical shocks or policy escalations - selling risk assets, pushing up yields, and quickly reshuffling positions once market pressure hits the "political threshold." During the Iran war-related volatility, this logic was fully demonstrated. The 30-year U.S. Treasury yield surged sharply in the early stages of the conflict, reflecting deep concerns in the market about inflation and fiscal prospects. As tensions eased, some yields began to fall again. Recently, global long bonds faced selling pressure due to inflation concerns caused by a prolonged hiatus, pushing yields back up and setting new highs. This seems to indicate that investors increasingly view long bonds as the "pain threshold" of policymakers - when yields spike sharply, they often force policymakers to adjust their positions. However, Akoner also warned that in ongoing geopolitical shocks, especially when shocks intensify inflation and growth risks, the market may shift from quick reversals to more deep and prolonged repricing, limiting the effectiveness of FAFO trading. FOMO trading: Gold retreats, oil frenzy? Asset rotation is also profound. Throughout 2025, retail investors flocked to gold for hedging, with gold prices skyrocketing 66% for the year, marking the largest annual increase since 1979 - rate cuts, geopolitical conflicts, central banks buying gold in large quantities, and gold ETF fund inflows all resonated positively. However, in January 2026 after hitting a historical high of nearly $5,600 per ounce, as Trump detained then-Venezuelan President Nicolas Maduro and the Iran conflict erupted, investors flocked to oil, causing gold prices to fall back to around $4,500 per ounce. Oil then became the new focus of the market. Since January, oil prices have nearly doubled, with Iran conflict causing disruptions in the Hormuz Strait, and Brent crude futures briefly touching $126 per barrel on May 1. The divergence between oil and gold highlights a change in investor behavior - the market is starting to favor energy-related assets over traditional safe haven assets. Despite significant directional bets on oil worth hundreds of millions of dollars before major announcements related to the Iran conflict sparked regulatory scrutiny, many retail investors are still speculating on the market's next swing. Piotr Matys, senior forex analyst at In Touch Capital Markets, jokingly commented, "The new buzzword 'NACHO' (Not A Chance Hormuz Opens) may become the next popular phrase." Intensification of cross-asset "whiplash effect" However, it should be noted that under the interplay of the above multiple forces, the intensification of the cross-asset "whiplash effect" is occuring - various asset prices are experiencing sharp and sometimes contradictory fluctuations due to investors' rapid responses to policy signals. This has led to commodities like oil being more driven by specific supply and demand factors, and the traditional correlations between various asset classes have become unstable: risk demand may surge during tariff threats or Middle East risk escalations, but may quickly dissipate after the stock market stabilizes. Akoner cautioned that while oil and gold can hedge some risks, sustained high oil prices may begin to transmit to inflation, thereby pushing up bond yields, "and then you will start to see broader cross-asset pressures."