Yesterday we looked at how Donald Trump was tagged as a victim of the "TACO theory" by former policy confidante, Anthony Scaramucci. Why TACO? Well, TACO stands for Trump Always Chickens Out.

He plays tough, but history shows he always chickens out! After threatening a heightened 50% tariff on the European Union late last week, Trump relented (TACOs, anyone?) and gave the trading bloc a month to come up with a better deal, or else.

The stock market will like this breathing space, with SPI Futures telling us that our S&P/ASX 200 index will open 17 points higher today. That's all thanks to the TACO theory: since making his EU tariff proclamation, Trump has now relented (read: ‘chickened out’), depending on if you're a subscriber to the theory or not.

Trump supporters would divine a method to this particular madness by saying it's a kind of negotiating technique. Threaten a big stick so the little stick you end up having to live with isn't so bad.

I looked at this TACO theory with guests on my TV show yesterday, where you can see their views on how you should play the stock market and whether you should be afraid of a big sell-off with Trump playing an aggressive tariff game. You can check out this episode that also uncovered some smart stock selections from some very smart experts.

Personally, I don’t care who’s right or wrong when it comes to what Trump says. I just want to believe that we can avoid another needless stock price smashing, the likes of which we saw on ‘Liberation Day’. The US market collapsed over 20% as a result! Since the President U-turned (or chickened out) over trade and tariffs with China, though, there has been a nice bounce back.

The latest tariff threat to the EU unnerved markets late last week, we thankfully didn't see the same sell-off that accompanied Liberation Day all over again. And following discussions between Trump and EU Commission President, Ursula von der Leyen, we have a brief reprieve until July 9 before these tariffs become a reality.

But we shouldn't all breathe out just yet. We have to be realistic. The market will be on edge until it sees what Trump thinks of the trade offerings brought from of China, the EU, Japan, South Korea and so on.

If he canes the world with even a 10% tariff on specific industries (or worse, our big super funds), the world’s stock markets will be relaxed, though our market could be negatively affected.

Ultimately, it’s a waiting game. A stay of execution. As a result, it's expected that the markets will be choppy and unwilling to spike much higher until these trade deals are thrashed out on paper (instead of in a Truth Social post).

CNBC talked with Guntram Wolff, senior fellow at the European think tank, Bruegel, who said that despite the extension of the tariff deadline, “massive uncertainty” still remained:

“This uncertainty is bad for business, it’s bad for consumers, and frankly it’s an unnecessary step in the negotiations,” he said. “It’s very unclear what exactly the U.S. President wants, [and] that’s the biggest obstacle at this stage, that in the negotiations the EU has made offers, has made proposals, but it doesn’t really know what the President wants.”

Wolff thinks the EU is “playing it rather well”, while the UK “has given in on all kinds of demands [and] China is the other extreme, [it] has really escalated … to a point where the U.S. had to blink, had to give in.

This is a “high-stakes tango” between Trump and the EU’s Ursula von der Leyen, as one expert called it. So, every tweet and news release will be significant for the market.

Respected fund manager Jun Bei Liu from Ten Cap told me after April 2 that the big sell-off was a “buying opportunity”. Yesterday she said she was not investing as though the sky was falling. These were my words, not hers, but she gives confidence to the nervous Nellies out there who might be going too defensive because the US President behaves like a human-curve ball.

While I expect some scary days for stocks as trade deal deadlines loom, the TACO theory (or Trump’s "methodical madness") should see equity and bond markets left relatively untouched.

If Donald, the "legendary" deal maker, fails to allay the fears of the bond and stock markets, however, he’ll be in a world of trouble. However, I'm sure - according to him - it'll be everyone else's fault.

I’m investing cautiously that it won’t.