Evercore ISI's Krishna Guha: Supreme Court outcome on tariffs is 50-50

Market Trends & Volatility - S&P and NASDAQ experienced their worst day in about a month, indicating increased market volatility [1] - Russell 2000 closed below the 50-day moving average, signaling rising volatility [1] - There's tension between seasonal dynamics and concerns about high valuations in AI-related names, potentially leading to profit-taking and drawdowns [6] - Services sector appears strong, but manufacturing and goods are weakening, creating a discrepancy in the economy [8][9] - The economy exhibits a K-shaped recovery, with bifurcation between sectors like AI and others, and between high-end and low-end consumers [11] Tariffs & Trade Policy - Evercore ISI estimates a 50/50 probability that the court upholds Trump's tariffs, higher than betting markets' expectations [3] - If tariffs are overturned, potential negatives include near-term uncertainty and the need to pay rebates [4] - A shift to a structured 301 or 232 process for tariffs could bring medium-term stability [5] - Tariffs on intermediate goods are disrupting supply chains and increasing input costs for US manufacturers [10] Federal Reserve & Interest Rates - The market still needs to digest a less certain Fed trajectory, with a potential rate cut followed by a timeout until a new chairman is in place [7] - The probability of a December rate cut is estimated at 65%, but the Fed may signal a pause in early 2026 [7]