Donald Trump doesn’t always chicken out, but betting that he will – the Taco trade – pays more reliably than his promises.
According to a Bloomberg analysis of more than over wagers on US prediction market Polymarket, bettors consistently overestimated the odds of Trump acting on his threats. On average, they priced a 34 per cent chance of action; only 28 per cent of events occurred.
The smart money made no such mistake. Between January 20th and September 30th, a simple strategy of betting against Trump acting would have earned a 12 per cent return, equalling the S&P 500’s gain over the same period.
Even better, a June-to-September version of the trade returned 19 per cent. Instead of learning, it seems bettors are increasingly likely to fall for Trump’s bluster.
The Taco trade is often cited as evidence of investor complacency: markets, it is said, have stopped taking Trump’s threats seriously. This data suggests otherwise. True, Polymarket is not the stock market, but it’s nevertheless notable that bettors are systematically overestimating Trump’s follow-through.
Of course, Trump still manages to do many things that once would have seemed unthinkable. Still, for all the noise about tariffs and threats, the soundest position for investors may be silence, and a quiet bet on nothing happening.
