Deutsche Bank’s Binky Chadha is bullish again, confident that the Trump administration will continue to back down on tariffs. “Our base case was for a significant rally in equities on a credible relent on trade policies,” the chief U.S. equity and global strategist wrote Tuesday. “In the event, the administration relented earlier than we had anticipated, driven primarily by market reaction, and before the emergence of any legal barriers or economic or political pain.” “This reinforces the view that if negative impacts of tariffs do materialize, we will get further relents,” Chadha added. Chadha raised his year-end S & P 500 forecast by 6.5%, to 6,550 from 6,150, implying roughly 10% upside from Monday’s close. The strategist was one of the biggest bulls on Wall Street coming into 2025, with an original price target of 7,000, but cut his target in April after the severity of President Donald Trump’s initial tariff announcement shocked Wall Street. Fundstrat’s Tom Lee is currently the biggest bull on the Street, with a 6,600 price target, according to the CNBC market strategist survey . Now the strategist expects that the fundamental corporate earnings strength underpinning his original thesis will hold, betting that the so-called “TACO trade” will curb any market or economic fallout. The “TACO trade,” or “Trump Always Chickens Out,” refers to an idea coined by a Financial Times columnist that investors can count on the president to back down from tariffs. The phrase has gained in popularity on Wall Street. CNBC’s Megan Cassella asked Trump directly about it in the Oval Office last week. .SPX 3M mountain S & P 500 over the past three months “We remind that prior to the outsized tariff escalation, the cycle showed plenty of legs with various aspects just beginning to kick in to the upside,” Chadha wrote. “We see plenty of room for equity positioning to rise with discretionary investors at neutral and systematic strategies still underweight and expect buybacks will remain solid with no signs of companies going into the bunker.” Stocks have staged an impressive comeback rally over the past two months. The S & P 500 is coming off its best monthly performance since November 2023 as investors grow increasingly confident that the president was mainly threatening high tariffs as a negotiating tool. The broad market index gained more than 6% in May, in large part after Trump reached a preliminary trade agreement with China, though he has since claimed it’s not being honored. Later in May, a federal court struck down Trump’s tariffs , adding to confidence the worst of the tariffs are behind investors, though they were then reinstated temporarily by an appeals court.
