Wall Street Creates Index to Predict Trump Policy Reversals
Deutsche Bank strategist developed a "pressure index" tracking approval ratings, stock performance, inflation expectations, and Treasury yields to forecast when President Trump may shift course on contentious policies.
9:03 PM
Wall Street has developed a quantitative tool to anticipate when President Donald Trump may reverse course on market-disrupting policies, a phenomenon traders have dubbed "TACO"—Trump Always Chickens Out.
Deutsche Bank strategist Maximilian Uleer created the "pressure index" to measure the likelihood of policy shifts by combining four equally weighted variables: one-month changes in Trump's approval ratings, stock market performance measured by the S&P 500, one-year inflation expectations, and U.S. Treasury bond yields.
The index has reached record highs in recent weeks amid escalating tensions with Iran and broader market volatility. According to market analysts, the index showed four significant spikes over the past 12 months, including periods around "Liberation Day" in April, controversy surrounding potential changes to Federal Reserve leadership last summer, the Greenland dispute in January, and the current Middle East crisis.
On Monday, March 23, the stock market posted its best day in six weeks as the White House announced "productive talks" with Iran, prompting Trump to pause planned infrastructure strikes. The Dow Jones Industrial Average, S&P 500, and Nasdaq all closed sharply higher on the news, while oil prices declined. The timing of the de-escalation coincided with elevated readings on the pressure index, suggesting the tool's framework may have predictive value.
The index's methodology reflects market participants' focus on identifying politically driven turning points. Financial Times columnist Robert Armstrong, who first coined the term "TACO," highlighted the index as a way to quantify external pressures that might compel policy reversals. Axios reported that the index considers whether bond markets and consumers are expecting higher inflation alongside shifts in presidential approval and equity performance.
Notably, suspicious trading activity preceded the Iran announcement. Almost $580 million in oil futures were traded approximately 15 minutes before the White House disclosed the constructive talks, causing oil prices to drop and stocks to surge. Hedge funds flagged the timing as abnormal, though the White House has denied any insider wrongdoing. Similar well-timed trades have occurred before other major policy announcements, raising questions about information asymmetries in markets ahead of significant geopolitical developments.
The pressure index represents an attempt by financial institutions to systematize the analysis of political risk and its market implications. By quantifying variables traditionally viewed as qualitative or unpredictable, strategists aim to provide investors with a framework for positioning ahead of potential policy shifts driven by mounting economic or political pressure on the administration.