Retail Traders Pile Into ’Trump Always Chickens Out’ Trade as Markets Shrug Off Tariff Panic

Forget the fundamentals—retail's betting on a personality play. While institutional desks parsed tariff tables, the meme crowd spotted a different signal: a pattern of political retreat. They're loading up on the 'Trump Always Chickens Out' trade, a cynical wager that bluster precedes backdown.

The Setup: Fear Versus Flow

Markets initially flinched at the latest protectionist rhetoric. Then, the memory of past showdowns kicked in. Traders recall the cycle—threat, volatility, and eventual de-escalation. This time, the crowd isn't waiting for the official pivot. They're front-running it, buying the dip on the assumption that history rhymes, loudly.

The Execution: A Retail Stampede

Order flows show a surge in short-dated, high-leverage positions from non-professional accounts. They're not hedging; they're speculating on a specific, non-economic outcome. It's a pure sentiment trade, bypassing traditional analysis for a read on political theater. The playbook is simple: sell the fear, buy the inevitable climb-down.

The Bottom Line: Narrative Over Numbers

This move highlights a market increasingly driven by behavioral cues over balance sheets. When policy becomes predictable performance, it gets arbitraged. The trade might work until it doesn't—but for now, the street's favorite analyst isn't an economist, it's a pattern-recognition algorithm fed on headlines. And sometimes, the most reliable indicator in finance is a politician's need for an exit ramp. After all, what's a tariff threat between friends? Just another buying opportunity for those who treat governance as a seasonal volatility strategy.

Retail crowd jumps back into ETFs as tariff scare fades

The strategy is now called the TACO trade, short for Trump Always Chickens Out. Every time Trump makes a big threat, stocks fall. Then he drops the threat, and the bounce follows. It worked last April. It worked in the summer. And it worked again this week.

Lale Akoner, who handles global strategy at eToro, said: “Retail appetite has been notably strong, with individual investors stepping into markets despite volatility driven by tariff headlines, geopolitical uncertainty and policy noise out of Davos.”

She said the amount of money flowing in shows people are still betting on risky assets.

Most of the buying went into exchange-traded funds. From January 14 to 21, big-name ETFs like Invesco QQQ, SPDR S&P 500, and Vanguard S&P 500 took in the biggest weekly inflows ever. Those three alone usually make up about 40% of all retail ETF trades, and they were the top picks again.

Kevin Xu, who used to be a retail trader and now runs a trading chat app called Alpha, said: “We all know Trump’s playbook now. He threatens something big, then walks back when he gets what he wants. The market overreacts, and this becomes a tremendous buying opportunity.”

Retail traders rotate into new names and go heavy in options

This week’s buying wasn’t random. It’s part of a long pattern. Retail traders kicked this off in January 2025, when China’s DeepSeek AI app caused a quick selloff in tech stocks.

Three months later, Trump’s first round of tariffs sent stocks into a double-digit drop. He gave up within the week. The rebound that followed became the biggest single-day rally in over 40 years.

Arun Jain from JPMorgan said:

“This level is comparable to last year’s major buy-the-dip episodes. Unlike those prior episodes, which faded quickly, the current New Year momentum has been sustained, pushing retail activity to an all-time high on a rolling monthly basis.”

Retail traders now make up nearly 25% of all activity on U.S. exchanges. Their impact goes beyond stocks. During last week’s cold snap, natural gas prices jumped. Retail traders used that spike to cash out of the BOIL ETF, locking in profits fast.

They’re also shifting from just the big tech names. While Tesla and Amazon are still getting a lot of action, other names like Netflix, Micron, Intel, and Taiwan Semiconductor are showing up more. Netflix posted earnings Tuesday. The others report next week.

On the options side, retail trading is on fire. Scott Rubner at Citadel Securities said daily trades in both shares and options are over 40% higher than the average from 2020 to 2025. Retail buying has been stronger than selling for seven straight weeks, and in 37 of the past 38.uying has been stronger than selling for seven straight weeks, and in 37 of the past 38. and in 37 of the past 38.

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