The market loves a good TACO trade, but one stock guru thinks investors would be better served if the president were to let stocks tumble.
With the Iran war in its second month, and with the prospect of a near-term ceasefire unclear, markets remain on edge. While Donald Trump has often pivoted amid intense volatility, JPMorgan’s former quant chief thinks the president should simply ignore the pain in the stock market as a way to show Iran he’s serious about the coflict.
“[A] better strategy for Trump would be to let stock market drop 10% or more and show that he doesn’t care,” he wrote on X. “If Iranians see he is not a hostage to stock market, they would more quickly accept (even a worse) deal. Short term pain for long term gain.”
Kolanovic criticized Defense Secretary Pete Hegseth in a follow-up post. A Financial Times report last month said that Hegseth’s stockbroker tried to invest in defense firms before the Iran war began.
As the Iran war has unfolded, Kolanovic has become increasingly bearish on the stock market. He has reiterated that he doesn’t think the TACO trade will boost markets, despite the relief it has previously provided for Wall Street when Trump has pivoted from other aggressive policies.
The ex-Wall Streeter said Trump would be best served by trading some short-term pain for investors for the chance to end the conflict and allow stable trading conditions to resume.
“Rather than constant petty lies to prevent a drop in stocks, trying to have cake and eat it, while just prolonging oil deficit and economic damage it will cause down the road,” Kolanovic added.
