Retail Traders Bet $6.3 billion on TACO Trade Amid Market Dip

- Retail traders invest $6.3 billion in U.S. stocks after tariff-related selloff. - Major ETFs, including QQQ and SPY, experience record inflows amid market recovery. Retail traders have capitalized on a recurring market pattern they call the “TACO trade.” The name, short for “Trump Always Chickens Out,” describes a strategy that turns tariff fears into a lucrative buying opportunity when markets rebound sharply. On January 23, 2026, Cryptopolitan reported that recent tariff threats from Donald Trump targeting Europe over Greenland triggered a market selloff. In response, retail investors channeled $6.3 billion into U.S. stocks over two days, investing $4 billion on Tuesday and $2.3 billion on Wednesday. As the strategy anticipated, Trump swiftly walked back his tariff threats, sparking a 1.2% market rally. Subsequently, gains extended as the broader market rose an additional 0.6% and fully reversed earlier losses. Investors directed a significant portion of these inflows toward exchange-traded funds (ETFs) such as Invesco QQQ, SPDR S&P 500, and Vanguard S&P 500. These ETFs, which dominate nearly 40% of retail ETF trading, experienced substantial weekly inflows between January 14 and 21 that set a new high. The “TACO trade” remains a reliable tactic for retail investors, who buy during selloffs spurred by tariff-related headlines and expect rebounds when Trump tempers his rhetoric. Kevin Xu, founder of the trading chat app Alpha, commented, “We all know Trump’s playbook now. He threatens something big, then walks it back when he wants leverage. The market overreacts, and this becomes a tremendous buying opportunity.” Analysts confirm that retail participants are increasingly using this strategy to navigate politically induced volatility. Broader trends in retail trading activity reflect record engagement, as JPMorgan's Arun Jain noted that retail trading has reached all-time highs on a rolling monthly basis. This trend showcases more robust and sustained activity compared to previous “buy-the-dip” patterns. Meanwhile, retail traders have also intensified their focus on options trading. According to Scott Rubner of Citadel Securities, this activity now exceeds the five-year average by over 40%. Diversification has also emerged as a key trend among these investors. While prominent tech names like Tesla and Amazon retain their allure, retail interest now extends to stocks such as Netflix, Micron, Intel, and Taiwan Semiconductor. Retail investors now drive nearly 25% of all U.S. exchange activity, and their growing impact underscores their increasingly central role in steering market momentum.