This kind of Trump-driven risk-off usually burns hot but not long, because tariffs (and tariff threats) tend to be used as leverage, and markets quickly start pricing a “walk-back” probability.
1) How long will the sell-off last?
Base case: 1 to 5 trading days of pressure, then either stabilisation or a partial rebound.
Typical pattern:
Day 0 to 2: Shock headlines, risk-off positioning, equities down, gold up, yields jump on inflation/tariff risk.
Day 3 to 5: Markets “re-price” from panic to probabilities (how real, how enforceable, how much carve-out).
Week 2 to 4: Either a relief bounce (if softening signals appear) or a grind lower (if policy actions actually start hitting data and earnings).
If the administration formalises the tariff schedule and companies start guiding to margin hits, it can extend into a multi-week drawdown.
2) When does Trump “TACO” happen: before markets break, or after?
Historically: before markets truly break, but after a visible market message.
Meaning:
He often pushes until he gets maximum negotiating pressure.
Then he shifts tone once there is clear financial tightening (equities down, yields up, USD too strong, or credit spreads widening).
So it is usually after a sharp initial drop, but before a full-blown disorderly sell-off.
What counts as “markets breaking” in practice?
He tends to respond when you see two or more of these at once:
Equities: fast drawdown accelerates and headlines turn “panic”
Rates: 10Y yields spike hard (tightening financial conditions)
Credit spreads: widening meaningfully (this is the real warning light)
USD: surges and threatens exports / risk assets
Liquidity: disorderly moves, gap-downs, failed auctions, etc.
3) What to watch for the “TACO signal”
The pivot usually comes as:
“We are in talks / very good progress”
“There will be flexibility / exemptions”
“Deadline could be extended”
“This is about fairness, not punishment”
Quiet leaks: “tariffs narrower than feared”
Timing guess (based on past behaviour):
If markets keep sliding: within 48–96 hours
If markets stabilise quickly: he may hold the line longer, 1–3 weeks, to extract concessions
4) My base-case call for this specific setup
Because the threat is tied to a political demand (“Greenland deal”) and not just trade deficits, the odds of headline volatility staying elevated are higher.
Still, the “risk-off impulse” itself is likely front-loaded:
Sell-off intensity: mostly this week
TACO probability: before Feb 1, unless markets ignore it
5) Trading approach (if you’re positioning)
If you are risk-on: treat it as headline-driven, avoid chasing the dump unless credit is breaking.
If you are hedging: gold/silver strength makes sense, but expect whipsaws.
Watch 10Y yields + credit spreads more than the S&P alone.
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