You can check out the whole episode to find out why this probably shakes out worse for Musk than Trump, and to find out why markets are surging in spite of everything. 

Indeed, stock markets soared in May. The S&P 500 finished up 5%, its best month since November 2023. The Nasdaq bounced 8% in May. After an early spring marked by anxiety and volatility, investors are riding a wave of enthusiasm into the summer.

Is it because we expect smooth sailing ahead? 

So what’s really going on here? 

Dennis explains that investors are “climbing a wall of worry. Because there is a lot to worry about. The market just doesn’t really look forward that much.”

Markets could get dicey again. But based on our current trajectory, says Dennis, “I see all time highs coming.”

George agrees. 

“There may be more volatility,” he says, “but until we are insolvent, this might be the market we’re dealing with.”

And what kind of market are we dealing with?

Dennis calls it “one of the most resilient markets I’ve ever seen.”

“We’re not worried about tariffs,” he says. ”Do we pay the piper down the road? Maybe, but it’s not gonna happen right now.”

So why aren’t the markets worried about tariffs? 

Financial Times columnist Robert Armstrong offered an acronymic theory in May that picked up a ton of meme steam over the last two weeks. Armstrong suggested that much of the market’s behavior can be attributed to something called the T.A.C.O. Trade. 

Actually, it’s not as delicious as it sounds. 

T.A.C.O. stands for Trump Always Chickens Out. 

We didn’t make it up. We’re not saying it’s true. And we’re not bringing it up to be politically inflammatory. But Armstrong’s point is that April’s uncertainty over Trump’s tariff policies has now given way to investor confidence that the president will ultimately back off of his most dramatic threats.  

George is a bit more charitable than Armstrong in his interpretation, suggesting that the president is exercising a form of “brinksmanship.”

“The goal is to show that they are willing to push back on China,” says George. “I think that intent is not a bad idea considering where we’ve gotten with them in trade.” 

George also points to China’s espionage, IP theft, and its role in proliferating fentanyl in the U.S. as reasons why it truly is necessary for any U.S. presidential administration to stand up to China.

George acknowledges that “Trump is right about these things”...

The problem, George says, is that “if you don't have clear goals, it’s very hard to get the outcomes that you want.”

Behind closed doors, the administration cites its goals as rebalancing American trade deals, isolating China from world markets, and reshoring American manufacturing. It’s not totally clear that the administration’s current approach will get us there. 

But that’s somewhat beside the point for investors right now. Also beside the point for investors is whether, as Amstrong says, Trump is backing down on tariffs out of fear or whether this is all just part of the Trump negotiation playbook. Whether investors are being bullish or they just smell bullshit is immaterial. 

Either way, investors seem to believe that Trump will ultimately land far away from his most dramatic tariffs threats, and that American markets will be resilient enough to handle the place that we end up. 

As Dennis says, “50% tariffs on all those Chinese goods will impact the consumer. But the markets don’t believe this will happen, at least not in that form.”

“The market believes it’s gonna be 10% across the board,” he says, “and we can stomach that.”

So for the moment, investors are feeling pretty zen about the whole tariff thing.

It’s possible that the rug gets pulled out from under us at some point.

But investors simply aren’t looking that far ahead.

“The market’s not even worried about what’s going to happen in July,” says Dennis. The market’s philosophy, he says, is "Let's continue this party.”