TACO & you

Did you listen? Hope so.

We told you to chill. Not to run to cash. Not to turn paper losses into real ones. To stay calm and invested. And to grasp that, no, it’s not different this time.

Inevitably, Trump turned TACO again last night. He did not destroy Iranian civilization, return that country to the Stone Age as threatened, and agreed to a ceasefire which will probably lead to a botched peace.

At least that’s what Mr. Market believes. And the result this morning was predictably explosive. The Dow, S&P and Nasdaq got lit. Oil prices plunged. It was an everything-rally, even as the drones kept flying and Iranians celebrated a significant, unlikely, improbable but clear victory. They survived. That was a win.

And look what happened with bonds. A big deal.

In Europe bond yields plunged a massive 25-bps. US Treasuries dropped to the lowest point in a month. The yield on benchmark Government of Canada 5s also plopped, taking a dive off the cliff as the US-Iran lovebunny thing happened.

Canadian bond yields take a dive on ceasefire news

Whazzit mean?

The odds of an interest rate cut in the States this year went from 0% to 50%. Just like that. As the inflation shock of soaring energy prices waned, bets rose that euro rates will also drop by the end of the year. Or sooner.

Oil prices fell the most in six years – and did so in mere minutes. And while the supply of crude through the Strait of Hormuz may not start flowing for days or weeks, investors are certain that Donald Trump is a spent force on the world stage after this fiasco. Inflation and interest rates will not be sprinting out of control. A global recession is no longer threatened. A wider Middle East war has been halted. And, yes, the White House will not be trying anything this utterly stupid again with the midterm elections approaching and Dems sweeping special elections in the meantime.

Let’s bring in Derek Holt, one of the brainiest guys on Bay Street. Here’s how the economist at Scotiabank saw things as the fragile peace descended:

All of which leads one to question exactly what was accomplished from war. The Iranian regime is in tatters but still in place. The nuclear stockpiles and program remain and it’s not at all clear what happens to them going forward. Iran may have actually managed to strengthen control of the Strait of Hormuz. Long-term damage to regional energy and broader infrastructure will take months to years to repair. The geopolitical risk premium attached to multiple commodity prices is probably permanently higher. The whole region is much more divided than previously. The Trump administration and broader US reputation among allies and foes has suffered a further erosion of any credibility it may have still had.

Frankly, it’s hard not to see Iran as the victor and I worry that a brutal Iranian regime and its terrorist network will rebuild and become a greater and angrier threat within an even more divided region and abroad.

For investors, lots of lessons here.

You’re best to ignore most geopolitical events. They’re noise. There’s no way an investor can win by reacting to headlines chronicling events that have already happened. You’ll lose selling falling assets. You will miss the days of explosive recovery. Ignore this stuff.

Also remember that investing is about financing the big events of life. Getting hitched. Getting kids. Getting a house. Getting retired. Those are long-term goals – and during the years or decades that you prepare for them, markets and asset values inevitably rise.

Do you even remember what the S&P 500 did when Russia invaded Ukraine? Of course not. The drop was big. But temporary. Completely meaningless in the sweep of time (and that was only four years ago).

Of course, be balanced. Be diversified. Have assets that pay you to own them – in interest, dividends or distributions – as well as those that grow and throw off capital gains. Don’t try to pick individual stocks but avoid risk and still gain growth through owning ETFs. Hedge against our dollar with a quarter of your portfolio in US-denominated assets. And be global, avoiding home country bias.

A newer lesson is to ignore Trump. The final nail in his credibility coffin came with that Easter Sunday post, followed by his comments that “a civilization will die tonight”. He relished in the rhetoric of a war criminal and genocidal crusader in the past week, then entered into an agreement in which his country achieved nothing after spending tens of billions and killing thousands.

More importantly, his deadlines and threats are hollow. He has routinely jacked around markets that have always taken the words of the American president with gravity.

No more.

Forget him. You are all that matters.

About the picture: “Mike from Hamilton and Charlie checking out this very affordable semi a few blocks from us,” writes Mike from Hamilton, of course). “Just under 280 G’s and not in a really terrible neighbourhood (only half a block from the nearest Beer Store and walking distance to the nearest Timmies) how could anyone complain. Here is the listing… www.realtor.ca/real-estate/29335384/31-12-garside-avenue-n-hamilton-homeside

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/04/08/taco-you/