The disruption to the oil market and critical energy effects may have long-term economic effects that investors are not pricing in.
Traders are miscalculating the severity and the duration of economic fallout from the Middle East conflict and are pricing in a “TACO” trade, which stands for “Trump always chickens out,” according to market analyst and founder of the Coin Bureau, Nic Puckrin.
The term was coined by Wall Street and refers to US President Donald Trump backing down in geopolitical conflicts. However, Puckrin warned that “Trump is not in sole control of the situation,” and there are no easy or quick exits from the war.
If oil continues to trade above $100 per barrel, economic growth will slow, and Personal Consumption Expenditures (PCE) inflation will rise by up to 1 percentage point, Puckrin said.
