It was an insanely busy day on Wall Street on Friday. We got inflation data, GDP and the Supreme Court ruling which sparked a relief rally in equities. Also, I made an a TV appearance amid all the chaos and you can see the clip below.
Supreme Court: Tariffs Struck Down
The headline of the week — and arguably the year so far — is today’s 6-3 Supreme Court ruling striking down Trump’s sweeping tariffs imposed under IEEPA. Chief Justice Roberts wrote the majority opinion finding that IEEPA simply does not authorize the president to impose tariffs. The ruling could trigger an estimated $129 billion in refunds to importers. However, the ruling made no mention of what to do with the tariff money collected so refunding the money will likely spark litigation for years. A messy decision from SCOTUS. However, markets reacted with some relief as the tariff overhang has been a persistent source of uncertainty for equity and fixed income positioning.
To be clear, the Court did not rule against this Administration’s tariffs. It only said IEEPA can’t be used to raise revenue. Therefore, the administration will now shift to other proven authorities—Sections 232, 301, and 122—to keep the tariff strategy strong. In some instances they will have more latitude to levy tariffs prospectively but they can’t keep the money collected under the IEEPA. There may be some restructuring but net/net there will be no change going forward but there is clarity on the legality of tariffs now.
GDP: A Big Miss
The advance Q4 2025 GDP print came in at just 1.4% annualized — badly missing the 3.0% consensus — after a strong 4.4% in Q3. A big chunk of the weakness traces back to the October–November government shutdown, which the BEA estimates shaved about a full percentage point off the number. Consumer spending grew 2.4% (down from 3.5% prior), and exports flipped negative after a strong Q3. That said, final sales to private domestic purchasers — the Fed’s preferred gauge of underlying demand — still posted a 2.4% gain, so it’s not as ugly beneath the surface. For the full year, 2025 came in at 2.2% growth, down from 2.8% in 2024.
PCE: Hotter Than Expected
The December PCE (Personal Consumption Expenditures) data came in higher than expected Friday morning. Core PCE printed at 0.4% month-over-month (4.8% annualized), with the year-over-year figure firming to 2.90%. This is a meaningful setback for the disinflation narrative. With the Fed already in “data-dependent pause” mode at 3.50–3.75%, this kind of print makes a near-term cut very difficult to justify. There is also data distortion in this data from the government shutdown so stay tuned for a better read in Feb/March.
The S&P 500
Stocks ended slightly higher in this shortened trading week thanks to a relief rally on Friday. However, in the bigger picture we remain in a multi-month range as stocks digest many factors such as inflation, tariffs, Fed policy and valuations. The biggie next week will be the earnings report from Nvidia on Wednesday as investors will want to hear from CEO Jensen Huang and his perspective on what happens in the coming 1-2 years within the artificial intelligence arena.
Seasonality in the stock market is historically weak thru February so trading sideways would be small victory. The next bit of uncertainty will be filling the Fed Chair role which opens up in May but hearings in the Senate should be announced soon for nominee Kevin Warsh.
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President, Kisco Capital
Kisco Capital LLC is a registered investment adviser. This commentary is for informational purposes only and does not constitute investment, tax, or legal advice, or a recommendation to buy or sell any security. Views expressed are as of the date of publication and subject to change. All investments involve risk, including the possible loss of principal. Past performance is not indicative of future results.
