Markets rarely change direction because of a single headline.
This week was not about spikes or collapses. It was about policy reinterpretation - particularly the relationship between government power, trade policy, and corporate valuations.
U.S. and global markets digested judicial rebalancing of executive authority, fiscal data that challenged expectations, and emerging geopolitical tensions that are quietly reshaping risk premia and capital allocation.
What looked like a typical mid-February tape had a deeper political layer.
Below is what moved markets and why it matters for positioning.
Supreme Court Curtails Executive Tariff Power - Markets Reprice Trade Risk
In a 6-3 decision, the U.S. Supreme Court ruled that the president lacked authority under emergency powers to impose broad tariffs, striking down a core mechanism of the 2025 tariff regime.
This ruling injected significant uncertainty into global trade policy and tax revenue expectations.
President Trump immediately announced plans to replace those tariff structures with alternative statutory mechanisms that could include a “global 10% tariff” on certain imports.
Treasury yields ticked higher as markets discounted potential lost tariff revenue and its implications for fiscal deficits. Equity sectors sensitive to trade policy (autos, industrials, semiconductors) saw elevated volatility late in the week.
Federal trade policy is no longer solely at the executive’s discretion. Judicial checks matter for the rulebook that underpins global capital flows. Investors are repricing risk around trade norms rather than ad-hoc presidential authority.
Equity Rotation: Defensive and Value Over Growth
Across major U.S. indices, the S&P 500 and Dow registered weekly gains, but leadership shifted away from mega-cap growth toward defensive, energy, and industrial exposures as markets digested the Supreme Court ruling and slowing macro data.
Software and cybersecurity stocks gave back gains after renewed fears of AI disruption and margin pressure resurfaced.
Rotation was not simply thematic. It reflected a reassessment of geopolitical and policy risk, where durable earnings and tangible cash flows are being priced more richly than speculative growth reliant on broad global demand.
U.S. GDP Slows & Core Inflation Holds
Official data released Friday showed U.S. Q4 GDP came in below expectations at 1.4%, signaling softer economic momentum than consensus models suggested.
Meanwhile, core PCE - the Fed’s preferred inflation gauge - surprised on the upside, maintaining stickier price pressures.
Slower growth argues against premature tightening, while persistent core inflation makes aggressive rate cuts less likely. The Federal Reserve is now balancing stagflation risk versus real activity risk.
This macro mix has grounded expectations for near-term rate cuts and supported tighter yields, which in turn pressure duration-heavy sectors such as technology.
Europe and Political Ripples Show Through Markets
European equities extended gains as rotation toward value and cyclicals broadened.
Meanwhile, the British pound weakened on regional political signals, including surprise electoral shifts, which markets view as raising potential fiscal and monetary ambiguity.
These trends highlight that political inflection points in Europe are now a market variable, not a background narrative.
Strategic Takeaway
This week’s tape was dominated not by one standout number, but by the reinterpretation of political authority and economic resilience.
The dominant moves were:
Judicial constraints on executive trade tools reshaping tariff risk premia
Market leadership rotation from growth toward defense, energy, consumer staples, and value
Persistent core inflation with slowing growth, complicating the interest-rate outlook
Geopolitical risk repriced into energy and real assets
This is an environment where structural macro and policy signals matter more than headline returns.