Taco, the trade that ate itself

Does he always chicken out, or doesn’t he? Like all loyal listeners to the FT’s Unhedged podcast, I’ve been telling my friends about Rob Armstrong’s perfect new acronym: Taco — Trump Always Chickens Out. From this observation, the Taco trade logically follows: whenever President Trump announces something that causes markets to swoon, buy during the fainting spell and wait for the clucking sound to emerge from the White House. Deservedly, the Taco trade has gone viral.

It all makes sense until you start to pull on the loose end of the logical thread. Why did Trump chicken out? Because the markets panicked when he announced a dramatic act of self-harm. But the fact that the markets were so alarmed in early April suggests that they weren’t really swallowing the Taco hypothesis.

Then came May; US equity markets had a great month despite the prospect of Trump’s 90-day “pause” expiring soon, the random imposition of further tariffs and the unsettling new prospect that Congress planned to give the administration powers to levy taxes on selected foreign investors at will. Perhaps the markets had finally digested the truth about Taco?

Which raises the possibility that the Taco trade will eat itself. (We are indebted to the FT’s markets guru Katie Martin for that phrase.) The markets could become overconfident, taking Trump neither literally nor seriously. The next time he announces that he is invading Switzerland, imposing tariffs on all exports from New York State or deporting to Peru every pygmy hippo he can find, traders and analysts will shrug, send each other Taco memes and ignore him.

Then the next step: the horrifying realisation that since the market has not blinked, Trump is not actually planning to chicken out. The step after that? The market will belatedly plunge, Trump will belatedly chicken out and the pygmy hippos will be saved — until the next time.

If that isn’t enough to send you into a spin, consider this: perhaps Trump’s pride will be so wounded by all the Taco talk that he will stop chickening out altogether.

This spiralling chain reaction may all seem like an Escher fever-dream, but the underlying point is simple and could come from a Greek tragedy: when you try to predict the future, you risk changing it. Some prophecies are self-fulfilling. Some prophecies are self-defeating. Any prophecy worthy of the name is going to interact with itself, one way or another.

This effect is at work in any financial market, in which the more efficient the market is at spotting overpriced assets to sell and underpriced assets to buy, the fewer mispriced assets there will be. Everyone who successfully spots a bargain contributes to that bargain vanishing. The same dynamic is at play any time you try to decide which line to join at a supermarket or at passport control: once everyone has rushed to join the shortest line, it is no longer the shortest.

But there are many other ways in which people change the future by trying to predict it. One notorious example from the history of computing is the “Osborne Effect”, named, perhaps unfairly, after the shortlived Osborne Computer Corporation. In the early 1980s, Osborne made an early and enormously covetable portable computer, but went bankrupt after prematurely announcing that new and better models were on the horizon. Demand for Osborne’s inventory is said to have collapsed because customers were waiting for the improved product to arrive.

Whether or not that was really Osborne Computer’s problem is something we can leave to the business historians. The point is that credible pre-announcements can make or break the current offering, depending on whether the prospect on the horizon is a substitute for what is now on sale (as with Osborne) or a complement for the current product, such as games for a console.

An even more infamous example is the Y2K affair. As the year 2000 approached, people started to worry about the risk of computers malfunctioning because old software used only two digits to record dates, and would confuse the year 2000 with the year 1900.

There were indeed some system failures. Some were minor but eye-catching, such as the failure of radiation monitoring systems at two Japanese nuclear power stations. Others were tragic, such as women in Sheffield terminating pregnancies after wrongly being told their babies were at high risk of Down’s syndrome. True to the theme of this column, other problems were caused not by the Y2K date change itself, but by botched software updates aimed at preventing trouble.

It is fair to say that there were no catastrophes as a result of the Y2K issue, which led some commentators to declare that the whole thing had been a foolish scare story designed to sell newspapers and expensive IT consulting contracts. Others argued that the absence of major disruption should be viewed as a triumph of preventive prophecy.

This is the preparedness paradox: the better you prepare for a problem, the more it seems that you were being silly because there was never a serious problem in the first place. From pandemic surveillance to nuclear deterrence, it can be hard to distinguish a far-sighted policy from a foolish waste.

Consider vaccination. Successful vaccination campaigns make common illnesses seem rare — giving credence to those who suggest vaccination is a needless risk. Global agreements to restrict CFC gases have helped the ozone hole to heal — and now, of course, there are people on social media asking why everyone lost their minds about an environmental problem that was so fleeting. While we’re on the subject, why do they waste all that money having guards at Fort Knox anyway? Everyone knows that place has never been robbed.

Even setting aside bad logic and bad faith, it is not easy to think clearly about the future. Serious forecasts, the ones that aim to be more than snack food for the mind, aim to change our understanding and therefore our actions. If they change our actions, they are changing the very future they hope to describe.

Written for and first published in the Financial Times on 13 June 2025.

Loyal readers might enjoy How To Make The World Add Up.

“Nobody makes the statistics of everyday life more fascinating and enjoyable than Tim Harford.”- Bill Bryson

“This entertaining, engrossing book about the power of numbers, logic and genuine curiosity”- Maria Konnikova

I’ve set up a storefront on Bookshop in the United States and the United Kingdom. Links to Bookshop and Amazon may generate referral fees.