Since becoming empty nesters, my wife and I have found ourselves with more free time in the evenings. Lately, Tuesdays have become an evening dedicated to playing Pickleball and followed up with Taco Tuesday.
Outside of Mexico, Southern California offers some of the best taco options available. Whether it’s filled with chicken, steak, fish, or whatever suits your taste, the tortilla serves as an ideal vessel. According to online sources, the term “taco” originated among Mexican silver miners, referring to a “plug.” The miners would use explosive charges shaped like a plug, wrapped in paper and filled with gunpowder, the inspiration for the term. Regardless of its true origin, I am a fan.
More recently, the term TACO has taken on new meaning. Since 2025, it has become shorthand for a situation where the president stands down from a proposed policy or initiative. The shift began with the announcement of the “Liberation Day” tariffs on April 2, 2025, which initially caused significant market turmoil and sell-off. However, markets quickly reversed course when the administration backed off from the tariffs on April 9th. The phrase “Trump Always Chickens Out” was popularized by Financial Times columnist Robert Armstrong on May 2, 2025. Since then, “TACO” has become widely recognized and used among Wall Street professionals and money managers.
Recently, markets experienced another sell-off when the administration suggested that the United States would annex Greenland, by any means necessary. In response, Europe unified as a bloc for the first time in a long while, strongly rejecting these overtures. As of last week, Trump announced that a “framework” for a future deal over Greenland had been reached. The push for acquiring Greenland was met with strong resistance from Europe and was polling poorly domestically. This situation led to another instance of “TACO” the administration stepping back from its initial stance.
Ian Bremmer of the Eurasia Group wrote an insightful article discussing how the strength of a country’s response can influence the administration’s actions. When Europe and China respond assertively, it often results in a TACO scenario. In contrast, when Venezuela responds weakly, the outcome is described as FAFO.
What does all this mean for money management? I propose a new acronym: CHIPS, which stands for “cool head includes pause and sleep.” Essentially, it’s wise to pause and sleep on decisions before reacting to market events. Those who overreact risk being whipsawed when unexpected reversals, like Trump playing the Uno reverse card, occur.
However, the TACO trade may be nearing its end as funds begin to flow out of the United States. Last year, foreign investors continued to buy U.S. assets, surpassing levels seen in 2024. Yet, for 2026, the threat to NATO and the suggestion that a NATO country could be targeted may have crossed a line. Stocks have bounced back but bonds have lingered. Bonds sold off after Liberation Day, pushing interest rates higher. While the 10-year bond yield has trended lower, it remains above 4%. Traditionally, high U.S. interest rates attract foreign capital, driving demand for the dollar. However, we are now witnessing a divergence: interest rates are climbing while the dollar weakens, signaling that foreign investors are moving capital out of the U.S.
We are now seeing movements in the global bond markets, with noteworthy actions from major institutional investors. Denmark’s pension fund, along with China, have begun to divest their holdings of U.S. Treasury bonds. While Denmark’s divestment amounts to approximately $100 million, a relatively small figure compared to the total outstanding U.S. bonds, it is still a development worth noting. Meanwhile in the United States, PIMCO Group’s Chief Investment Officer, Dan Ivascyn, has announced the firm’s plan to launch a multi-year strategy focused on diversifying away from U.S. assets and increasing exposure to other regions such as Japan, Australia, and the United Kingdom. The primary motivations cited for these shifts are concerns about unpredictable government policies, especially those influenced by trade tariffs, and the broader fiscal outlook.
Let me sum it all up by comparing my Taco Tuesday Pickleball night with investing. The discipline required for successful investing is similar to the patience and steadiness needed in a game of pickleball. Achieving long-term results is less about quick, flashy wins and more about maintaining consistency and minimizing unforced errors. As we look ahead, we expect that the economic headlines and tariff policies in 2026 will closely resemble those of 2025. Our commitment is to remain patient and wait out the current environment, particularly in the face of ongoing trade and tariff uncertainty. Despite this, we are closely monitoring the bond market, which often provides earlier signals of economic shifts than the stock market. Notably, any increase in the yield of the 10-year Treasury bond may indicate rising concerns within the economy. Higher interest rates can negatively affect the housing market, and also tend to have a detrimental impact on stock prices.
We would like to express our sincere appreciation for your continued trust and partnership as we approach Spinnaker’s 10th year. Thank you for choosing us as your financial partner. We are grateful for the opportunity to serve you and remain dedicated to supporting your long-term success.
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