Humans think in terms of narratives; TACO stands for Trump Always Chickens Out.
We’re hot-wired to do so; condense something complicated into a story, and we understand it more easily.
That raises the risk of over-simplification and narrative fallacy — a notion from Nassim Taleb — in which we grab hold of a version of events and allow it to color incoming data.
Any good tale, even if it’s untrue, can change prices — and thereby the economy surrounding it — if enough people believe it.
The S&P 500 had a great, broad advance Tuesday. It’s up 19% since its nadir on April 8, one of the biggest rallies ever for the index.
But it’s equally true that the S&P is lower than six months ago, and from the close on the day after the election.
How should we view it? Here are the narratives driving markets now:
1. The Bond Vigilantes Have Gone Away
This is a reversal of last week’s “The Bond Vigilantes are back, and this time they really mean it” story.
2. US Consumers Are Back
Americans continue to be the world’s spenders of last resort
4. The TACO Trade Is On
This one was christened by friend and former colleague Rob Armstrong of the Financial Times.
TACO stands for Trump Always Chickens Out.
John Authers Bloomberg 28 May
Kommentarer