Wall Street's 9-Hour Thriller: From Bold Threats to Ceasefire Agreement, TACO Arrives as Scheduled

Ask AI · Why did Trump pivot to ceasefire talks at the last moment?

By | Zhou Airen

Edited by | Liu Peng

On April 7, during U.S. trading hours, the market once again experienced a “V-shaped reversal.” It first went through anxiety over the dim prospects for a ceasefire, then concern about Trump’s final ultimatum at 8:00 p.m. Eastern Time, and afterward, amid the sound of artillery, came Trump’s repeat TACO as U.S. president, while Iran also accepted the ceasefire proposal put forward by Pakistan.

So once again, U.S. stocks staged a reversal—from falling to nearly 1%, to posting a fifth consecutive day of gains. That marked the S&P 500’s first run of six straight trading days of increases since October last year. Then international oil prices’ decline approached 20%. “The consensus is that everyone is very sure that in his mind, Trump really wants to end this war—but the question is Iran.” A top international hedge fund portfolio manager in New York told Tencent News’ “Qianwang.”

Based on our first-hand groundwork across major Wall Street hedge funds, investment banks, and asset management institutions, most of the industry is essentially in a wait-and-see mode. Traders don’t dare to trim positions lightly, and they also don’t dare to go all-in (all-or-nothing). Trading activity is thin; trading volume is down 22% compared with the 20-day average. They are waiting for the final ceasefire deadline for Iran set by Trump (and sure enough, it has been extended again). The challenge is that Iran, controlled by the Revolutionary Guards, won’t simply yield. It remains intriguing how Trump will announce that he “won” this battle.

TACO as scheduled

About one and a half hours before the “Iran destruction day” that Trump himself set, he TACO’d again.

About one and a half hours after the U.S. stock market closed, Trump posted on Truth Social saying, “Based on my meetings with Pakistani Prime Minister Sherrif and Army Chief Munir, they asked me to suspend tonight’s destructive forces to be sent to Iran, and assuming that the Islamic Republic of Iran agrees to immediately, fully, and safely open the Strait of Hormuz, I agree to suspend bombing and attacks against Iran for two weeks. This will be a two-way ceasefire! The reason for doing so is that we have already achieved and even surpassed all of our military objectives, and we have made significant progress in reaching a long-term peace agreement with Iran and a Middle East peace agreement. We received Iran’s ten-point proposal and believe it is a feasible basis for negotiation. Nearly all of the past issues between the United States and Iran have been agreed upon, but the two weeks will allow the agreement to be finalized and take effect.”

In the early hours of April 8, the Supreme National Security Council of Iran also issued a statement, and the tone was equally blunt. It said that, in accordance with the Supreme Leader’s advice and approval from the Supreme National Security Council, Iran accepted the ceasefire proposal put forward by Pakistan.

The statement said that Iran had achieved nearly all of its targets in this war, that the enemy “suffered a historic and total defeat,” that the Iranian side would “continue the struggle until its great achievements are consolidated, and establish a new security and political landscape in the region,” and that it had decided to hold negotiations in Tehran to determine details—“consolidating the fruits of victory through political negotiations within at most 15 days.” The statement also said Iran rejected all plans proposed by the enemy and drew up a ten-point plan submitted to the U.S. through Pakistan. The plan emphasizes the following key points:

According to Tencent News’ “Qianwang,” after the market close on the 7th, information from Goldman Sachs’ trading desk showed that the market broadly held a wait-and-see stance, awaiting the final ceasefire deadline for Iran set by Trump. Pakistani Prime Minister Sherrif issued a statement saying he had requested that President Trump extend the final deadline by two weeks; at the same time, Sherrif also requested that Iran open the Strait of Hormuz for two weeks as a show of goodwill. Then Trump’s TACO statement appeared.

Behind Wall Street’s calm

As of last week’s market close, the S&P 500 had rebounded 5% from last week’s low points and is currently only down 4% from the Feb. 27 closing price. Even on the “day of ultimate showdown,” U.S. stocks still delivered a major reversal.

In fact, besides some traders underestimating the situation and thinking that a prolonged war might not be much of a deal, more traders aren’t “clairvoyant.” Rather, faced with binary extreme events, the market’s mindset of tactical game-playing is dominating.

For traders, once they miss the best few days for a market rebound, it means that a year’s performance is almost ruined in an instant—so the cost of going fully flat (closing out) is huge.

According to research from JPMorgan earlier, if you look over a longer 30-year period:

Holding everything continuously, the S&P 500’s annualized return is about 8%

After missing the best 10 days, the annualized figure drops to about 5.3%

After missing the best 20 days, it leaves only about 3.4%

After missing the best 50 days, long-term returns even turn negative (about -0.9%)

If you use more intuitive data as an example: if $10k was invested in global stock markets in early 2000, by 2026 it would become about $56.9k. But if you miss the best 10 days during those 26 years, the final amount would be only $32.7k.

The key is that traders genuinely believe U.S. stock valuations are already fairly reasonable and earnings are quite solid; but for the disruption from the fighting, stocks might have already surged sharply.

Goldman Sachs also noted that the Nasdaq Index’s forward P/E ratio has narrowed to about 21 times, roughly in line with the level reached at the bottom during the liberation-day period last year. It’s also not far from the lows in 2022 (rate hikes) and 2020 (the COVID-19 pandemic). In addition, although IT sector year-to-date earnings per share (EPS) revisions have stayed high (above expectations), this implies the sector has become cheaper.

The Nasdaq Index’s forward P/E ratio compresses sharply

Geopolitical risk premium still elevated

There are still many unknowns about the ceasefire agreement and whether it can hold. Unknown as well is to what extent Israel, which coordinates with the U.S. to strike targets inside Iran, will comply with the agreement. Trump said the ceasefire’s effectiveness depends on the reopening of the Strait of Hormuz.

“What can be considered certain is that the risk premium across the entire Middle East will rise.” Chen Kaifeng, chief economist at American Huisheng Financial, told Tencent News’ “Qianwang.”

Chen Kaifeng also laid out the most likely scenario going forward—war dragging on, acceleration of deglobalization, and capital returning home.

In his view, the Middle East has long been a high-risk region, but in the past, global capital and market systems have systematically underestimated that risk. The current escalation of the conflict is, in essence, a process of risk recognition correction and repricing.

Specifically, many people used to view some Middle Eastern cities (such as Dubai and Abu Dhabi) as stable—and even as investment destinations with “safe-haven” attributes. But in reality, historically, the Middle East and the Eastern Mediterranean region have long been marked by conflict and turmoil (continuing for hundreds of years). This “seemingly stable” state is, in essence, only a temporary phase.

As the conflict escalates, the market begins to rediscover the Middle East’s true risk level, shown directly by: many investment meetings being canceled in recent times (including in Qatar, Saudi Arabia, Dubai, Abu Dhabi, and others); business activities being disrupted; and within the short term, it being almost impossible to restore normal international exchange and investment rhythms. Since investment meetings typically require months of advance preparation, this means investment activity will be continuously affected over the coming months or even half a year. The willingness of foreign capital to enter will decline, and divestment may even occur.

A deeper trend is that, amid rising geopolitical uncertainty, countries may be more inclined to allocate capital domestically, investing more in their home countries or in “safe and controllable areas.” Cross-border investment (especially into high-risk areas) will be more cautious.

The most pessimistic outcome is that Trump ultimately carries out fierce military strikes, including strikes on Iran’s power plants, which could also harm civilians. The problem is that hours before the Bayeik Highway Bridge (B1 Bridge) was destroyed, more than 100 U.S. experts in international law jointly issued an open letter warning that the U.S.’s military strikes against Iran violate the UN Charter and could constitute war crimes.

The Iranian Revolutionary Guards cannot easily yield. Several experts in international relations and economics told Tencent News’ “Qianwang” that although Iran is facing enormous destruction, Iran has used “asymmetric warfare” to prove that the U.S. is unable to completely defeat it through airstrikes. If Iran can hold out until the U.S. withdraws, it will have greater say in the Middle East.

The reason is that if the U.S. withdraws from the Middle East, Israel’s influence in the region would be boosted to an unprecedented level. Gulf states such as Saudi Arabia lack military strength, and may further turn toward Israel, and may also further seek guarantees from China. On another front, Russia is undoubtedly the big winner in this Middle East war. Russia may deeply hope that Iran wins, and will ensure that while the U.S. is bogged down, it keeps consuming its own energy by sharing intelligence, military technology, and economic support. There are reports that Russia has provided Iran with large quantities of medical supplies and may even provide drones.

So, after weighing various factors, Trump’s repeat TACO seems to be the outcome the Wall Street had previously anticipated. The only question is: then what happens? Will Iran really charge a “toll” for the Strait of Hormuz? In one phrase commonly used in U.S. politics and business—off-ramp (Trump’s downhill path) is still hard to find.