President Donald Trump‘s ongoing visit to China could potentially unsettle markets if it fails to bring about a breakthrough in the U.S.-Iran war, according to an analyst.
Thierry Wizman, global FX and rates strategist at Macquarie Group, told Market Watch on Wednesday that the strong performance of the stock market might give Trump the “political cover” to reconsider military strikes on Iran next week. Analysts at Macquarie coined the term “SALSA,” which stands for “Stocks are lifting, so attack,” the opposite of the popular TACO trade, an acronym for “Trump always chickens out.”
Wizman warned that a new wave of risk-off sentiment could emerge as early as next week if China refuses to intervene and the U.S.-Iran war escalates further.
“It could happen next week if the Iranians are not making concessions and if [Trump is] rebuffed by the Chinese, who tell him they’re not going to help him here,” said Wizman. He added that it is not his “baseline view,” but warned that the risk could increase.
Krugman’s NACHO Trade Scenario
Meanwhile, economist Paul Krugman warned the Strait of Hormuz could remain closed under a “NACHO trade” scenario—short for “Not A Chance Hormuz Opens”, signaling a potential …
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