TACO script premieres as scheduled! Trump's "Declaration of Civilizational Collapse" turns into a two-week ceasefire. Tech stocks' super rebound is imminent.

Zhitong Finance APP learned that, just as investors in the stock market began to make aggressive bets on Monday, another “TACO moment” that is driving a broad global risk-asset rally—including a rebound in popular AI tech stocks, cryptocurrencies, and high-yield corporate bonds—has arguably arrived as expected. After the regular U.S. stock-market close on Tuesday, U.S. President Donald Trump posted on social media early Tuesday local time, saying, “I agree to pause the bombing and attack operations against Iran for two weeks.”

With both the U.S. and Israel saying they agreed to a temporary ceasefire, less than 12 hours after Trump issued a furious threat to “let all of Iran’s civilization perish,” the tense situation between the two sides has arguably seen a dramatic reversal. After the latest ceasefire development was released, the decline in U.S. WTI crude oil futures had expanded across the board to 17%. But to keep the drop going, traders may need to see shipping through the Strait of Hormuz truly and immediately resume. Meanwhile, U.S. stock-index futures for all three major U.S. indexes surged in after-hours trading after the U.S. market close, and the Nasdaq 100—often dubbed the “tech stocks” bellwether—soared by nearly 3% at one point.

Trump’s latest move to extend the deadline matches the extreme pressure/threat pattern he has consistently followed: first set a final deadline, then delay or loosen it—what’s known as the classic “TACO moment.” In his latest post on social media, Trump wrote: “In conversations, Pakistan’s Prime Minister Shehbaz and the country’s Army Chief Asim Munir requested that the U.S. pause the plan to send ‘destructive military force’ to Iran at 7 p.m. Eastern time on the 7th, and based on our discussions, and given that the Iranian government has agreed to ‘reopen the shipping in the Strait of Hormuz—completely, immediately, and safely,’ I hereby agree to pause the bombing and attacks against Iran for two weeks.”

Then, the post explains, “This will be a bilateral-level ceasefire agreement.” Trump said he made the ceasefire decision because, “We have achieved and even exceeded all military objectives.” Trump also emphasized that regarding the final agreement on “long-term peace in Iran” and achieving “peace in the Middle East,” substantial progress has also been made.

Trump said the U.S. received a proposal from Iran containing ten points, and he believes, “This proposal provides a workable foundational framework for negotiations between the two sides.”

“This will be a two-way ceasefire! The reason for doing so is that we have reached—and even surpassed—all military objectives, and we have made significant progress in achieving a long-term peace agreement with Iran and a Middle East peace agreement. We received the ten-point suggestions proposed by Iran and believe this is a workable basis for negotiation. Nearly all of the past points of contention between the United States and Iran have been agreed upon. The two weeks’ time will allow the agreement to be finalized and take effect. As President of the United States and on behalf of countries across the Middle East, I am truly honored to have made progress toward resolving this long-standing issue.” Trump’s latest posted tweets show.

Trump’s ultimatum turns into a “The Boy Who Cried Wolf” real-life reality show! The “TACO script” the market is betting on plays out as scheduled

Historical experience tells investors that since March 23, Trump has repeatedly delayed Iran-related deadlines. Recent developments in geopolitical news are making clear that the White House’s actual reaction function right now is more like “threaten on one side, observe negotiation progress on the other, and keep an option to delay”—and these seemingly contradictory signals are also why the market has started pricing in another short-term version of the “TACO moment” that will drive a major rebound in stocks and other risk assets—especially because Trump’s recent “left-brain/right-brain” type of remarks have led the market to be increasingly convinced that, at least in the short term, the moment to trade “TACO” is coming soon.

A trading strategy that is becoming increasingly popular on Wall Street—TACO (Trump Always Chickens Out / Trump always backs down at the last minute)—was created during the period in April 2025 when Trump launched an unprecedented “tit-for-tat tariff” campaign against the world. Back then, traders bet that either the U.S. government would withdraw the threats of tariffs, or even if the tariffs were carried out, they would be far less tough than Trump had threatened and would not significantly drag down U.S. economic expansion.

The term TACO was coined by a columnist at the Financial Times to describe Trump’s wavering on tariffs after his April 2, 2025 “Liberation Day” speech, but ultimately he would choose to back down, and the stock market would rebound sharply. When asked about “TACO” at a press conference, Trump became furious, saying the question was “malicious.”

The “TACO” strategy is now widely adopted by traders as the current hottest trading strategy. Whenever Trump issues new, even more aggressive tariff threats or throws other major threats that trigger a market selloff, investors across global stocks-and-bonds markets bet that he will ultimately back down or that the actually implemented policies will be greatly weakened compared with Trump’s verbal threats. They then choose to buy aggressively at an appropriate time of weakness, placing big bets that the stock market will see a major rebound soon.

After U.S. President Trump agreed to pause the bombing of Iran for two weeks, oil prices fell on cue, while U.S. market stock-index futures surged sharply. This helped the market temporarily shake off the steep downside trajectory and rare volatility caused by the Middle East conflict that had been raging for six straight weeks.

Famed hedge fund investor Thomas Hayes is one of the institutional investors betting on the return of Trump’s “TACO moment” at the start of this week. “Asymmetric tilt to the upside,” said Hayes, chairman of New York’s Great Hill Capital. If Trump messes up “clumsily,” he said, U.S. stocks “will retest the recent lows, about another 4% lower.” “If we get a solution or a ceasefire agreement, then this market is like a coiled spring—there is room for at least 10% of a forceful upside move.”

In a report to clients, Pepperstone strategist Michael Brown wrote: “As we have pointed out multiple times, for weeks now, participants have been eager to hear any positive developments like ceasefire news, and even more eager to see specific actions taken by both sides to ease the situation.”

Supercharged tech stock rebound is building momentum

For global risk assets such as stocks, the direct implication of this latest ceasefire news is clear: tail-end escalation risk has cooled sharply in the short term, and risk assets have been granted a clear bullish breathing space. For global technology-stock assets, this kind of easing tends to be even more sensitive than the broader market, because the tech sector had been hit deeper by geopolitical risk, the surge in oil prices, and pressure from discount rates. Once the worst-case scenario temporarily recedes, risk appetite repairs often flow first back into high-Beta tech growth stocks.

A team of stock strategists from Wall Street giant Goldman Sachs said that as global tech stock valuations have fallen to below valuation measures of the MSCI Global Stock Market benchmark index, the tech sector is becoming increasingly attractive to investors. Goldman has recently shifted—overall—from a cautious stance on the future trend of the stock market to a bullish one. Previously, in a research report on fund flows for Monday, Goldman showed that the systematic selling pressure driving the decline is fading. In the coming month, “hot money” (i.e., large-scale funds around CTA strategies) will likely switch from cutting passive positions to net buying. This means the mechanical sell orders that had weighed on the market are gradually turning into tailwinds supporting the rebound.

In a research report released Tuesday local time, a Goldman strategists team led by Peter Oppenheimer wrote that amid the latest round of Middle East geopolitical storms wreaking heavy damage, the technology sector—whose stocks have risen significantly in recent years and whose valuations are near historical highs—has recently seen weak overall performance. However, after valuation declines caused by this round of geopolitical conflict, the technology sector is starting to offer investors very attractive long-term investment opportunities. Oppenheimer and other strategists wrote, “Compared with the consensus earnings growth expected by Wall Street analysts, its valuation has fallen below the level of the overall global stock market.”

At the start of this week, a research report published Monday by Goldman’s trading team showed that, “One of the most important market marginal changes is progressing in a direction that is positively favorable to bulls.” Goldman’s bullish logic led by Oppenheimer is bullish on both valuation and long-term allocation logic—emphasizing that after the global tech stocks experienced a pullback, relative to growth prospects they have become cheaper and more attractive. This systematic fund research, meanwhile, is bullish from a trading perspective within a short-cycle framework—emphasizing that if the rebound continues, “hot money” strategies such as CTA and volatility-target strategies may further chase buys, thereby amplifying the slope of the advance. So the former is more like the view of Wall Street’s “asset allocation committee,” while the latter is more like the latest view of a “tactical trading desk.”

Within tech stocks themselves, the stocks directly related to AI computing infrastructure—those “AI computing super squads” led by Nvidia, TSMC, and AMD and Broadcom—are often the most sensitive layer to the logic behind the overall market and tech-stock rebound. They also tend to be the first to move and with the largest upside push. The underlying core logic is extremely “hardcore”: this layer is directly tied to sustained, record-breaking AI capital expenditures by tech giants, not just telling a story.

In recent years, the “AI computing supply chain” as a sub-segment has been the most sensitive and quickest to respond to the market rebound logic, and it has also shown the most violent rebound magnitude. This trend has been vividly reflected in the risk-asset rebounds on March 16 and March 31. In other words, in a “risk-calming rebound” scenario, technology stocks closely linked to AI computing infrastructure will most likely be one of the market’s most core bullish offensive directions. This potential trend also implies that sub-sectors with high earnings visibility and whose profits are highly tied to record AI capex—AI GPUs/ASICs, OCS exchange switches and optical interconnects, optical modules/silicon photonics circuits, HBM/memory, 2.5D/3D advanced packaging, and data center power chains—have the highest profit elasticity to changes in AI capital expenditure, and are also the easiest to be prioritized for capital replenishment when risk appetite recovers.

Goldman’s trading team identified significant signs of a low-buy turn for the global equity market at the level of short-term “hot money” flows such as CTA. In terms of long-term asset allocation, a Goldman team led by Oppenheimer believes that the tech stocks themselves already have very solid valuation attractiveness.

In its latest research report, a Goldman strategists team led by Oppenheimer said that if the Iran war creates any lasting impact on the global economy, it could also be a long-term positive for this sector, because the technology industry has lower sensitivity of cash flows to economic growth. Oppenheimer and other analysts emphasized that as valuations fall below the overall stock market, the technology sector is becoming more and more investment-attractive to investors.

“Wall Street veteran” Yardeni, along with another Wall Street financial giant, Wells Fargo, also supports Goldman’s bullish view that the technology sector has gradually moved from a “crowded overvalued trade” back into a “range with long-term allocation appeal.” Veteran strategist Ed Yardeni emphasized that although tech stocks are still pressured in the short term by sentiment and geopolitical disruptions, in terms of earnings resilience, valuation digestion, and the logic of long-term AI penetration, long-horizon capital is entering a more cost-effective positioning window.

(Editor: Wang Zhiqiang HF013)

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