TACO Trade Back In Focus As Iran War Rattles Markets- But JP Morgan Says This Asset Class Could Be The Real Winner

As the Iran conflict unfolds, Wall Street remains cautiously optimistic that it could end within about a month, aligning with President Donald Trump's projected timeline for resolving the crisis, said J.P. Morgan.

According to the bank, Wall Street is currently banking on the “TACO” trade, an acronym for “Trump Always Chickens Out”. This strategy has proven successful in the past, particularly with Trump’s often-reversed aggressive foreign policy on tariffs. Some investors see the Iran conflict as a potential “buy-the-dip” opportunity, expecting asset prices to rebound once the conflict ends.

Jacob Manoukian, U.S. head of investment strategy for J.P. Morgan Private Bank and Wealth Management, however, warns that betting on the TACO trade with Iran could be riskier than previous instances. Manoukian told Fortune over the weekend that the main risk scenario Wall Street is trying to assess is that "global events have started," but it remains unclear "where they're going" or how they can be controlled.

JPMorgan Backs Infrastructure Assets

While J.P. Morgan anticipates the Iran conflict to end within weeks, they are not advising investors to act based on this uncertain outlook.

Manoukian highlighted the need for balanced portfolios, pointing to underutilized classes such as infrastructure assets, which could offer resilience amid current geopolitical tensions. He added that investors are increasingly turning to alternative assets, as evergreen fund structures provide some liquidity while helping clients better understand the value of the asset class.

In a December report titled Alternative Investments Outlook 2026, JP Morgan stated that core infrastructure is at a turning point as capital spending is expected to exceed depreciation for the first time this century, driven by rising energy demand, energy security concerns, and the energy transition.

A short-term capital shortage could boost investor returns, with those holding energy utilities, particularly generation, transmission, and distribution assets, well positioned to benefit while retaining the infrastructure's defensive qualities.

Strategists See Short War, Markets Rebound Ahead

The Iran conflict has stirred up a considerable amount of uncertainty in the global markets. Earlier this month, Edward Yardeni, President of Yardeni Research, predicted a "short war scenario", expecting the conflict to wind up in a few weeks. He urged investors to seek opportunities in equities.

Similarly, Fundstrat's Tom Lee described recent volatility as a typical “risk-premium expansion,” not a structural breakdown. He expects markets to rebound into late March and potentially strengthen through April.

Price Action: Over the past month, Vanguard S&P 500 ETF (NYSE:VOO) declined 1.99%, while Invesco QQQ Trust (NASDAQ:QQQ) rose 0.61%, as per data from Benzinga Pro.

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