The Supreme Court struck down Trump’s tariffs, but we expect the Office of the US Trade Representative to pivot to a plan B.
Tensions have been rising, but we don’t expect these developments to derail global stock markets or end the business cycle.
US GDP was weaker than expected, and Personal Consumption Expenditures somewhat hotter.
You know there’s a lot going on when, within the first two months of the year, you keep reaching for the Vladimir Lenin line: “There are decades where nothing happens, and there are weeks where decades happen.” For markets, however, the more important question is not whether a decade’s worth of events occurred in a single week, but whether those events were unexpected. Looking at the events from last week — from a Supreme Court tariff ruling to US-Iran tensions to economic and inflation data — the answer is largely no.
The tariffs that President Trump enacted last year under the International Emergency Economic Powers Act (IEEPA) were struck down in a 6-3 ruling by the US Supreme Court on Friday.1 Was that a shock? Not particularly.
We now expect the Office of the US Trade Representative to pivot to a plan B, potentially re-enacting these tariffs using Section 338 of the Tariff Act of 1930, Section 122 of the Trade Act of 1974, Section 232 of the Trade Expansion Act of 1962, or Section 301 of the Trade Act of 1974, or some combination of them.
The Supreme Court’s decision offered no guidance on refunds, including whether refunds are required at all, and we wouldn’t expect any to be issued soon, if ever.
Bond yields rose modestly in response, but a 30-year US Treasury yield of 4.72% suggests that the market remains largely unconcerned about the sustainability of US debt.2
Attention then shifted to rising tensions between the US and Iran. Again, this wasn’t a surprise. These risks have been well-signaled for some time.
From an investment perspective, we believe geopolitical events should always be evaluated through the lens of whether they meaningfully alter global growth or the actions of the world’s central banks, particularly the US Federal Reserve (Fed). Iran is a relatively small economy and, while it produces roughly 3%–4% of global oil supply, most of which is exported to China.3
Oil prices have risen on the tensions, but from relatively low levels, and global supply growth continues to outpace demand, with inventories expected to build in 2026.4 This is not a 1970s-style oil shock, nor is it likely to alter the Fed’s easy policy stance, in our view. As a result, we don’t expect these developments to derail global stock markets or end the business cycle. History supports this view, as the MSCI All-Country World Index (ACWI) rose 14.28% in the six months following the start of the 12-day Israel-Iran war on June 13, 2025.5
US gross domestic product (GDP) was weaker than expected6 and inflation, measured by core Personal Consumption Expenditures (PCE), was somewhat hotter.7
Should that be surprising? Perhaps at the headline level for GDP, but the softness was driven primarily by delayed government spending. The US consumer remained healthy, and investment in artificial intelligence (AI) continued at a strong pace. Core PCE strength was driven largely by inflation in services prices rather than goods and reflects reasonably solid underlying demand. We’d expect inflation to moderate over time as productivity gains from AI become more evident. We don’t believe this changes the trajectory for the Fed.
In short, it may feel as though a decade is happening every week, but we believe the fundamentals for the stock markets remain sound, with relatively strong nominal growth and a US central bank that’s still likely to cut interest rates.
Date |
Region |
Event |
Why it matters |
|---|---|---|---|
| Feb. 24 | US | Consumer confidence | Gauge of consumer sentiment affecting spending |
| Eurozone | Consumer Price Index (CPI) (Jan.) | Key inflation gauge | |
| Feb. 25 | US | New residential sales | Housing market strength indicator |
| US | Corporate Bond Market Distress Index | Measures stress in corporate bond markets | |
| Eurozone | Gross domestic product (GDP) (Q4 final) | Economic growth | |
| Feb. 26 | US | Advance durable goods | Signals business investment and demand |
| US | Gross domestic product (GDP) (2nd release) | Updated view of economic growth | |
| US | Initial jobless claims | Labor market conditions | |
| Feb. 27 | US | New York Federal Reserve staff Nowcast | Real-time GDP estimate |
On one side, weaker growth makes Fed easing more likely. On the other side, stronger growth supports an intact business cycle. Either can be supportive of markets if inflation stays contained.
Despite last week’s selloff in software stocks and other momentum-driven areas, we believe the fundamental backdrop remains supportive.
We got some clarity on the two big risks we outlined in our 2026 investment outlook: Federal Reserve independence and an AI bubble.
Important information
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Image: koganami studio / Getty
Some references are US-specific and may not apply to Canada. All data is based on the US dollar.
All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
The Consumer Price Index (CPI) measures the change in consumer prices and is a commonly cited measure of inflation.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
Businesses in the energy sector may be adversely affected by foreign, federal, or state regulations governing energy production, distribution, and sale as well as supply-and-demand for energy resources. Short-term volatility in energy prices may cause share price fluctuations.
The Federal Open Market Committee (FOMC) is a committee of the Federal Reserve Board that meets regularly to set monetary policy, including the interest rates that are charged to banks.
Gross domestic product (GDP) is a broad indicator of a region’s economic activity, measuring the monetary value of all the finished goods and services produced in that region over a specified time period.
Inflation is the rate at which the general price level for goods and services is increasing.
The MSCI All Country World Index (ACWI) captures large- and mid-cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries. With 2,515 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Personal consumption expenditures (PCE), or the PCE Index, measures price changes in consumer goods and services. Expenditures included in the index are actual US household expenditures. Core PCE excludes food and energy prices.
Purchasing Managers’ Indexes (PMI) are based on monthly surveys of companies worldwide and gauge business conditions within the manufacturing and services sectors.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic, and political conditions.
The opinions referenced above are those of the author as of Feb, 20, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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