The court limits Trump’s tariff power… the White House hits back with a 15% blanket tariff… how will it all play out?… digging into the portfolio implicationsLast month in the Digest, we laid out three possible ways the Supreme Court could rule on President Donald Trump’s global tariffs:Path #1: The court upholds the tariffsPath #2: Tariffs are struck down (narrow ruling)Path #3: Tariffs are struck down (broad power ruling)On Friday, we got our answer…In a 6–3 decision written by Chief Justice John Roberts, ...

Core Viewpoint - The U.S. and India have established an interim trade deal aimed at reducing tariffs and enhancing trade relations, marking a significant step in their partnership [1][2]. Group 1: Trade Agreement Details - The interim agreement will lead to the elimination or reduction of tariffs on all U.S. industrial goods and various agricultural products from India, including animal feed, tree nuts, and fruit [5]. - In return, the U.S. will impose a reciprocal tariff rate of 18% on Indian goods such as textiles, leather, plastics, and certain machinery [6]. - The U.S. will also remove tariffs on additional products, including generic pharmaceuticals and aircraft parts, following the successful conclusion of the agreement [8]. Group 2: Economic Impact - India plans to purchase $500 billion worth of U.S. energy products, aircraft, precious metals, technology products, and coking coal over the next five years [10]. - The agreement is expected to create new opportunities for farmers and entrepreneurs in both countries, reflecting the deepening economic ties between the U.S. and India [2].

Market Overview - Stocks are lower, primarily driven by a significant decline in Microsoft shares, which has negatively impacted the S&P 500 and NASDAQ indices [1][3][8] - The Dow Jones Industrial Average is down 111 points, with a peak decline of over 300 points earlier in the day [2] - The NASDAQ experienced its worst day in a month, dropping over 2.5% at its lowest point [2][3] Company Performance - Microsoft shares fell by 12%, marking its worst day in months, while Meta shares rose by 10%, indicating a strong performance in the communication services sector [4][5] - Other tech companies, including Oracle, SAP, and Salesforce, also saw declines, with SAP down 16% and Salesforce down 7% [6] - The software sector ETF (IGV) is deep in the red, reflecting widespread selling pressure across major software stocks [40] Sector Analysis - The communication services sector is up 2.4%, reaching a record high not seen since last year, while the tech sector is down 2.4% [5] - Energy and real estate sectors are also performing well, with both sectors up more than 1% [5] - Concerns about AI spending are weighing heavily on the software sector, with analysts suggesting that investors are shifting focus to sectors with clearer growth prospects [39][41] Economic Indicators - The bond market shows a slight decrease in yields, with the 10-year Treasury note yield down to 4.22% and the 30-year yield at 4.85% [4] - The US dollar index is slightly negative, indicating a potential shift in currency dynamics [4] Consumer Insights - Despite low consumer confidence reported, retail sales remain solid, supported by lower gas prices and a resilient consumer base [19][20] - There is a noted dichotomy in consumer behavior, with high-end consumers showing stronger spending compared to lower-income consumers [20] Investment Strategies - Analysts suggest that the current market environment presents buying opportunities in sectors like small caps and fintech, which are expected to benefit from ongoing economic growth [14][15][66] - The fintech sector is highlighted as a key area for investment, particularly companies that aim to disrupt traditional financial systems and improve affordability for consumers [66][67]

Market Overview - The Dow Jones Industrial Average declined by 559.24 points (-1.13%) on January 20th, 2026, due to escalating geopolitical tensions and the threat of new tariffs from President Trump on eight NATO allies [1] - Investor confidence was shaken, leading to a sell-off in equities and a shift towards safe-haven assets like gold and silver [1] Company Performance - Technology and industrial stocks were significantly affected, with 3M Company (MMM) experiencing the largest drop at -6.50%, influenced by post-earnings movements [2] - IBM (IBM) also faced a notable decline of -4.47%, while Nvidia (NVDA) and Amazon (AMZN) fell by -2.57% and -1.77% respectively, indicating a broader sell-off among major tech firms [2] Resilient Stocks - Despite the overall market downturn, some Dow components showed gains, with UnitedHealth Group (UNH) rising by +1.05% [3] - Travelers Companies (TRV) increased by +0.71%, and Procter & Gamble (PG) gained +0.70%, demonstrating resilience in a challenging market [3] - Boeing (BA) and Nike (NKE) also recorded modest increases of +0.14% each, highlighting pockets of strength amidst the decline [3]

Core Insights - The stock market is influenced by year-end tax loss harvesting and portfolio adjustments as the holiday season approaches [1][2] - Significant gains in the stock market have been driven by AI-related trades, with some investors considering profit-taking and tax strategies [2][6] Company Performance - Companies like Palantir (PLTR) and Robinhood (HOOD) have seen substantial year-to-date stock gains, while the worst performers in the S&P 500 are under scrutiny as investors look to mitigate losses [3][5] - The worst-performing stocks include names from various sectors such as consumer, industrial, and services, with examples like Lululemon (LULU), Dow (DOW), and Trade Desk (TTD) [5][6] Market Dynamics - The struggles of underperforming companies are attributed to execution issues, changes in customer demand, and cyclical factors rather than the rise of generative AI [6][7] - Despite the overall positive impact of AI on many companies, tax loss harvesting may increase selling pressure on underperformers, potentially exacerbating their declines [7][9]

Core Viewpoint - The credit markets are showing signs of stability, with only a slight widening of credit spreads, indicating that Wall Street may be less concerned than equity market shareholders about recent reports [1][2]. Credit Market Insights - The fixed income markets are perceived as reliable indicators of investor sentiment regarding bank balance sheets, suggesting a positive outlook for the financial services sector [2][3]. - Corporate bonds are still considered attractive, particularly high-quality and shorter-duration credits, despite the tightening spreads historically [4][5]. Earnings Season Analysis - Earnings reports across various sectors, including financial services and consumer goods, are expected to remain solid, with corporate executives indicating strong margins [7][8]. - Potential risks include trade policy changes and consumer spending patterns, which could impact margins and overall earnings [8][9]. Trade Policy Concerns - The possibility of additional tariffs on Chinese imports remains a concern, with hopes for a diplomatic resolution to avoid negative impacts on businesses [10][11]. - Companies are seeking clarity on trade rules to adapt their strategies effectively, as uncertainty hampers decision-making [12]. Inflation and Federal Reserve Outlook - The upcoming Consumer Price Index (CPI) report is crucial, with expectations of a 3% year-over-year increase, which may influence Federal Reserve policy [14][16]. - The Fed is likely to remain vigilant regarding inflation while also considering labor market conditions in their decision-making process [15][16].

Economic Resilience and Inflation - The economy has shown more resilience than expected, with companies reporting stable conditions during the second quarter [2] - Anticipation of the Federal Reserve's actions in September is noted, with a focus on small-cap performance [3] Small-Cap Market Performance - Small caps have outperformed by approximately 400 to 500 basis points since April 8, largely unrecognized in the broader market [4] - Relative valuations for small caps remain cheaper compared to large caps, with small caps yet to reach new highs since November 2021 [5] Earnings Outlook - Small cap earnings turned positive in the second quarter after two years of negative performance, which is crucial for continued outperformance [6] - Expectations are that small cap earnings may outperform large cap earnings in the third quarter [6] Impact of Interest Rates - A lower interest rate environment would benefit small cap companies, particularly those with variable debt [7] - The anticipation of lower rates is already being factored into the small cap market [7] Capital Expenditure Cycle - The recent legislation allowing 100% depreciation on capital expenditures may signal the start of a capex cycle that benefits small cap companies [8] Focus on Industrial Sector - The focus is on economically sensitive areas, particularly industrials, which are expected to benefit from reshoring and re-industrialization in the U.S. [10][11] Historical Context of Small Caps - The Russell 2000's representation as a percentage of the Russell 3000 was 4.2% at the end of the second quarter, a level not seen since the 1980s [12] AI and Market Broadening - The AI narrative is shifting towards beneficiaries of AI, which may drive broader market participation beyond large caps [14]

Core Insights - Bunge Global SA (BG) is set to report its second-quarter 2025 results on July 30, with expected sales of $11.4 billion, reflecting a 14.2% decline year-over-year [1] - The consensus estimate for earnings per share is $1.19, indicating a significant year-over-year drop of 31.2% [1] - Earnings estimates have remained unchanged over the past 30 days [1] Financial Performance Expectations - The Agribusiness segment is projected to generate revenues of $7.75 billion, down 19.7% from $9.66 billion in the prior year [6] - The adjusted EBIT for the Agribusiness segment is expected to be $202 million, a 32% decrease from the previous year [7] - The Refined and Specialty Oils segment is anticipated to report revenues of $3.18 billion, showing a slight growth of 1.8% year-over-year, but with a 28.2% drop in operating income [8] - The Milling segment's revenues are estimated at $419 million, reflecting a 4.5% increase from the year-ago period [9] Earnings Surprise History - Bunge's earnings have exceeded consensus estimates in two of the last four quarters, with an average surprise of 9.2% [2][3] Stock Performance - Bunge's stock has declined by 29.7% over the past year, compared to an 11.5% decline in the industry [11]

Trade Relations - Thailand is attempting to avoid a 36% export levy [1] - Thailand is offering greater market access for US farm and industrial goods [1]

Core Viewpoint - Philippe Laffont of Coatue Management has invested significantly in Philip Morris International, indicating the company's potential as a growth stock within the defensive tobacco industry [1][3][17] Investment Details - Laffont purchased over $220 million worth of Philip Morris stock in Q1, marking it as his fourth-largest purchase and second-largest new addition [3] - This investment is notable given Laffont's typical focus on technology stocks, which include major companies like Meta Platforms and Amazon [2] Growth Drivers - Philip Morris is experiencing growth through its smokeless products, particularly Zyn and Iqos, which are appealing alternatives to traditional tobacco [5][8] - Zyn's U.S. shipment volumes surged 53% to 202 million cans in Q1, prompting an increase in full-year shipment guidance to between 800 million and 840 million cans [7] - Iqos has also seen a nearly 12% increase in heated tobacco units (HTUs) to 37.1 billion units, with strong sales growth in Japan and Europe [9] Market Position - Philip Morris has successfully bought back Iqos' U.S. rights and is preparing for a broader rollout in the U.S. market, which could enhance growth without cannibalizing existing customers [10] - The company has managed to produce modest cigarette volume growth internationally, contrasting with the steep decline seen in the U.S. market [12][13] Financial Metrics - Zyn and Iqos have better unit economics compared to traditional cigarettes, with Zyn offering six times better product contribution levels and Iqos providing 2 to 2.5 times [11] - The stock is currently trading at a forward P/E ratio of under 23 and a PEG ratio of under 0.35, suggesting it is undervalued [15] Conclusion - Given its defensive nature, growth potential, and attractive valuation, Philip Morris is viewed as a favorable investment opportunity [14][17]