From Bloomberg, February 20:
It wasn’t a complete shock for markets. Yet the Supreme Court’s ruling striking down the cornerstone of President Donald Trump’s economic policy did create ripples across asset classes.
Treasuries and a Bloomberg gauge of the dollar fell, while stocks rallied, after the court struck down Trump’s sweeping global tariffs. The court said Trump exceeded his authority by invoking a federal emergency-powers law to impose his “reciprocal” tariffs across the globe as well as targeted import taxes the administration says address fentanyl trafficking.
One reason why market reactions were somewhat muted: Trading in predictions markets had been leaning toward this outcome at some point this year after justices asked critical questions about the legality of the tariffs in a hearing last year.
At the same time, many traders expected Friday’s market reactions to potentially be short-lived, since officials in the Trump administration have said that the White House had other legal options at its disposal to implement tariffs should the high court rule against the president. Shortly after the decision, Trump told attendees at a breakfast with governors that he had a backup plan, according to CNN....
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....Here’s what investors and strategists across Wall Street are saying:
Ian Lyngen, Head of US Rates Strategy at BMO Capital Markets Corp
“The SCOTUS decision was widely anticipated by market participants and therefore it wasn’t surprising to see a limited response in US rates.”
James Athey, a Portfolio Manager at Marlborough Investment Management
“Pretty mild reaction so far. Market is not really sure what to do. The big issue would have been any notion of refunds.”
“I think this news is bearish UST at the margin. It’s a short term negative for the budget so should be bearish Treasuries. But it’s really hard to see how it would actually work - very complicated.”
Jane Foley, Head of FX Strategy at Rabobank
“Although the White House is expected to find another way to push on with tariffs, there will be concerns about refunds in the meantime and this could worry the Treasury market which could unsettle the USD given the US’s already weak fiscal position.”
Aroop Chatterjee, Managing Director at Wells Fargo Securities
“We expect relief from the SCOTUS ruling to be temporarily risk positive mostly via lower uncertainty. The administration retains significant tariff making authority via other statutes but some of these are untested and others will take time. We continue to think the administration will replace most tariffs via other means but this is over the medium-term.”
“Separately, we think the refund process will be very complicated and is unlikely to meaningfully boost growth/consumption near-term. Its hard to see this leading to trend shift in the USD in either direction. The market will likely refocus on incoming data that continues to point to an economy and labor market that is recovering. This keeps the Fed firmly on the sidelines and limits further USD weakness in our view.”
Dave Mazza, Chief Executive Officer at Roundhill Financial
“Markets will treat the tariff rollback as a near-term positive, because it takes an immediate tax off the supply chain and removes one headline overhang. But it’s not the end of the tariff story, it’s the start of the next chapter, and the path from here likely means more legal and policy whiplash, not less.”
Matt Maley, Chief Market Strategist at Miller Tabak + Co LLC
“A lot of investors have been expecting the Supreme Court to rule this way, so it seems like they are more focused on the situation in the Middle East going into this weekend. But yes, I do think it removes some uncertainty. What we’re seeing in the markets is more of a ‘buy the news’ reaction.”
....MUCH MORE, including Marc Chandler and:
Chris Murphy, Co-Head of Derivatives Strategy at Susquehanna International Group
“This ruling appears to have created more questions and we are not seeing a lot of convicted trades in the immediate aftermath. I do expect an epic truth social post coming soon, however.”
