A US Investor’s Handbook on the Upcoming Supreme Court Decision Regarding Tariffs

Supreme Court Decision on Trump Tariffs Poised to Impact US Markets

Photographer: Allison Robbert/Bloomberg

A forthcoming Supreme Court verdict regarding the broad tariffs introduced by former President Donald Trump in April is set to become a pivotal moment for both US equities and bonds, with the potential to send ripples through financial markets.

US stocks have continued their upward momentum into the new year, propelling the S&P 500 Index to unprecedented heights. This rally—now about 40% above the lows seen in April—has been fueled by the surge in artificial intelligence and Trump’s partial rollback of his strictest tariffs. Meanwhile, Treasury yields have retreated from their 2025 highs as investors anticipate ongoing rate cuts from the Federal Reserve amid a cooling economy.

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If the Supreme Court determines that Trump overstepped his authority with these comprehensive tariffs, uncertainty could persist, as the administration might attempt to reintroduce similar measures using alternative legal justifications.

However, market experts suggest the immediate response from investors is more foreseeable. Should the court overturn the tariffs, stocks could rally on expectations of improved corporate profits and relief for consumers. Conversely, Treasuries might face downward pressure, as the resulting economic stimulus could complicate the Fed’s rate-cutting plans and exacerbate the federal deficit.

The financial community may receive clarity as early as this week, with the Supreme Court scheduled to issue opinions on Friday—potentially offering the first insight into the case.

Potential Boost for Equities

According to Wells Fargo & Co. Chief Equity Strategist Ohsung Kwon, eliminating the tariffs could increase S&P 500 companies’ pre-tax earnings by 2.4% in 2026 compared to last year. This anticipated profit growth could drive investors to bid up stock prices if the court rules against the tariffs. James St. Aubin, Chief Investment Officer at Ocean Park Asset Management, described such a decision as a likely trigger for a market rally.

Some sectors are positioned to gain more than others. Companies that rely heavily on imports have been hit hardest by the tariffs, while financial institutions such as banks may benefit from stronger consumer confidence and spending.

On the other hand, Haris Khurshid, Chief Investment Officer at Karobaar Capital, noted that industries like materials, commodities, and domestic manufacturers—those that thrived under protectionist policies—could see their performance lag.

Industries and Companies to Watch

Apparel and toy manufacturers, which depend on imports from China and other Asian nations subject to the highest tariffs, are expected to be among the biggest beneficiaries, according to Bloomberg Intelligence. The sector saw gains in November when Supreme Court justices expressed skepticism about the tariffs during hearings.

Notable companies to monitor include Nike Inc. and Mattel Inc., as well as Deckers Outdoor Corp., Under Armour Inc., Crocs Inc., and American Eagle Outfitters Inc.—all of which have faced challenges due to tariff uncertainty. Home furnishing brands like Wayfair Inc., Williams-Sonoma Inc., and RH have also experienced volatility.

Industrial giants such as Caterpillar Inc. and Deere & Co. stand to gain significantly from potential tariff refunds, according to Kwon. Transport companies, including United Parcel Service Inc., FedEx Corp., and various trucking firms, could also benefit if the removal of tariffs and the effects of Trump’s tax cuts stimulate the economy.

Major banks like JPMorgan Chase & Co. and Goldman Sachs Group Inc., along with private equity leaders such as Blackstone Inc., experienced turbulence last year amid fears that trade tensions would dampen economic growth. Fintech firms like Affirm Holdings Inc. and Block Inc., as well as cryptocurrency-linked stocks, are also prone to sharp market swings.

Fiscal Implications and Bond Market Outlook

Bond investors are preparing for potential volatility, though it may be short-lived. Treasuries delivered over 6% returns last year—their strongest performance since 2020—as the market anticipated renewed Fed rate cuts. Tariff revenues have helped ease some pressure on the federal deficit, temporarily alleviating concerns about rising government debt.

JPMorgan strategists, including Jay Barry, cautioned that removing tariffs could reignite worries about fiscal stability, potentially leading to higher long-term yields and a steeper yield curve. However, they believe any negative impact would be limited, as the administration could seek new legal avenues to restore most tariffs.

According to Morgan Stanley analysts, including Martin Tobias and Matthew Hornbach, investors will closely monitor announcements regarding the timing and amount of refunds the government may owe importers, as this could influence the volume of Treasury bill issuance.

Still, since many traders have anticipated such a ruling and factored in some risk, Morgan Stanley expects any bond selloff to be brief. They suggest that the more enduring response would be investors buying bonds after the decision, driving yields lower.

Reporting contributed by Janet Freund, Jordan Fitzgerald, and Georgie McKay.

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