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Supreme Court Killed the Tariffs — But the Market Party May Be Short-Lived

Posted on by Claudius

In a ruling that sent shockwaves through Wall Street on Friday, the Supreme Court struck down President Trump’s sweeping tariffs in a decisive 6-3 decision. The justices determined Trump exceeded his authority when he invoked emergency powers under IEEPA to slap import taxes on most of America’s trading partners. Just like that, the signature economic policy of this administration got its legs cut off by the highest court in the land.

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    • Markets popped on the news. The S&P 500 gained 0.7% to close at 6,909, the Dow added 231 points, and the Nasdaq climbed 0.9% — snapping its worst weekly losing streak since May 2022. Five straight weeks of red, erased in a single Friday afternoon. The biggest winners? Companies with heavy import exposure. Jefferies immediately named Nike, Yeti, and SharkNinja as top beneficiaries, while Temu parent Pinduoduo surged over 4.5% as traders priced in cheaper Chinese goods flowing back into the U.S. market.

    But here’s what should keep you sharp: the underlying economic picture is deteriorating fast. The same day the tariffs fell, we learned the U.S. economy grew at a measly 1.4% annualized rate in Q4 — a full percentage point below estimates and a nosedive from 4.4% in Q3. Meanwhile, the PCE inflation gauge (the Fed’s favorite) came in hotter than expected at 2.9% year-over-year, with core inflation ticking up to 3.0%. Slow growth plus sticky inflation is the textbook definition of a word nobody wants to hear: stagflation.

    And the so-called “smart money” isn’t celebrating. According to VandaTrack, retail investors barely flinched after the ruling. This week is tracking as one of the weakest for net retail inflows in recent years. The mom-and-pop crowd that powered last year’s rally? They’re sitting on the sidelines, watching.

    The tariff reversal also doesn’t exist in a vacuum. Oil prices surged 6% this week as the U.S. built up its largest military presence in the Middle East since 2003, eyeing a potential conflict with Iran that could choke 20% of global oil supply through the Strait of Hormuz. Gold blasted to $5,125 an ounce, and silver surged 9% to $84.50 — classic fear trades that tell you the big money is hedging, not going all-in on equities.

    Meanwhile, Kalshi prediction market contracts put a 58% probability on the S&P 500 falling to at least 6,200 at some point this year — an 11% correction from its record high. And history backs it up: in midterm election years with a new president, the median intra-year drawdown for the S&P 500 is a gut-punching 21%. That puts the odds of a full-blown bear market at roughly 50% in 2026.

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    • The bottom line? The tariff ruling was a genuine win for consumers and importers — smaller businesses especially, who lacked the supply chain muscle to dodge the duties. But one court decision doesn’t fix weak GDP, stubborn inflation, geopolitical tinderboxes, or a market trading at 21.5x forward earnings when the historical average is 20x. The relief rally feels good, but the fundamentals are whispering something different. Stay alert, stay diversified, and don’t mistake one green day for an all-clear signal.