Some time in the not-too-distant future, markets are going to be hit with headlines about the US Supreme Court on tariffs.
Technically, they have until late-June to rule but because this was an expedited hearing, that's likely to come much sooner. It was looking like the earliest option would be the week of January 19 based on the Court's schedule but today that scheduled changed. Friday has been announced as a 'decision day'.
This is how the court usually operates. There is a 1-3 day 'heads up' that a decision is coming but no indication of which cases will be decided. It could be tariffs or a myriad of other cases before the court. We will have to be ready for until it's announced, which is usually at 10 am ET.
Arguments in early November suggested the court was skeptical that Trump had authority to impose the tariffs under a 1977 law. Kalshi pegs the odds at 70/30 that tariffs are struck down so that's a good guide on what's priced in but the stakes are high.
Some trades to consider on both sides of the decision:
1) Import-heavy retailers (gross margin relief + fewer price hikes)
XRT, COST, WMT, TGT, AMZN, BBY
2) Apparel & footwear (sourcing-heavy, high sensitivity to landed costs)
NKE, GAP, RL
3) Consumer discretionary factor (tax-cut-like effect for goods)
XL, FIV, ELF
4) Housing / “stuff in the house” supply chain (materials + fixtures + appliances)
ITB, LEN, W, RH
5) Downstream manufacturers (big metal users; tariffs are a cost)
CAT, DE, PCAR, ETN
6) Autos & cross-border supply chains (North America / global OEMs)
GM, F, TM
7) USMCA currencies
You can buy MXN or CAD or the country ETFs EWW (Mexico), EWC (Canada)
If tariffs are upheld, you could see a benefit in the steel names but those are protected under separate Section 232 tariffs that aren't at risk from the Supreme Court, so I would buy a dip in steel names at some point (maybe not right after the decision). It's similar for aluminum.
I also believe that one of the cleanest trades on the tariff ruling is gold as it should weaken if tariffs are blocked and pop if they're upheld.
Some names that could do well if tariffs are upheld
1. Reshoring / factory build-out / industrial capex (picks-and-shovels)
XLI, FLR, PWR, J, ROK, PH
2. Inflation/uncertainty hedges (if tariffs = higher prices + noisier growth)
XLE (energy as hedge)
GDX (gold miners as uncertainty/stagflation hedge)
3. Bonds as uncertainty rises
- If the Supreme Court supports fentanyl tariffs as a national emergency, what else might they support?
I would also keep a very close eye on the above names in the lead-up to Friday because everything leaks lately and it's open season on insider trading.
There is plenty of nuance at stake about whether the Supreme Court leaves other paths open and whether tariffs are refunded (unlikely) but it's something to think about for the next two days.
