Investment Conclusion
Supreme Court decisions from now to January will set the scope of this Administration’s executive powers and determine the fate of the equity bull market. Some of the decisions to be made will have societal impacts that will not immediately impress markets.
But two decisions will. One is the ruling on the Trump v Cook case (continuing into January) on the power of the President to dismiss a US Federal Reserve Governor. This speaks to the Independence of the Fed.
The other is “Learning Resources, Inc. v. Trump” case (hearings begin on November 5) which will decide on the legality of the use of IEEPA (emergency powers) to impose tariffs.
Three potential judgements are considered here.
- A blank rejection of use of IEEPA. The Trump Egonomics edifice, which has been very successful, crumbles and the bull market dies.
- IEEPA tariffs are deemed legal. Then tariff disruption increases so much that the disruption causes economic damage that the markets cannot ignore. But that could take a while.
- Or the tariffs are deemed illegal, but the Administration is given a year to put things right. I don’t think that under these circumstances the IEEPA tariffs can be replaced or the trade “deals” renewed in the same shape as they were before. So it will be a year of slow crumbling.