This Week in Review | Tariffs, Russia–China–India, Bond Markets

Transcript

Meg Leiken:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. Now, let's review what happened this week.

First, an update on tariffs.

Last Friday, the US Court of Appeals for the Federal Circuit delivered a significant 7-4 decision, upholding a lower court ruling that found President Trump's tariffs exceeded his authority under the International Emergency Economic Powers Act. The ruling invalidates several key executive orders, including baseline 10% universal tariffs, reciprocal tariffs announced on Liberation Day, and tariffs on China, Canada and Mexico imposed over fentanyl trade concerns. Importantly, auto and metal tariffs remain unaffected since they're technically based on separate legislation. The majority opinion emphasized a crucial point: Congress alone holds the power to tax, and tariffs are fundamentally a form of taxation. The court noted that the act never explicitly mentions tariffs, and when Congress delegates taxing authority, it does so with very specific language. The Trump administration had argued that the act granted the president flexibility to regulate trade during emergencies, positioning tariffs as regulatory tools rather than taxes. However, the court rejected this interpretation. While this ruling is significant, its immediate impact remains limited. The current tariff structure stays in place through October 14th, giving the administration plenty of time to appeal. The president has already announced plans to appeal to the Supreme Court with a request for expedited review. The Supreme Court challenge was always a likely scenario, and the legal challenges we're witnessing were always a possibility when the Liberation Day tariffs were first announced. And now, we're seeing this scenario play out in real time. For long-term investors, making decisions based on pending legal proceedings isn't advisable, in our view. As these court cases unfold, we expect greater clarity to emerge— which typically benefits markets regardless of the final outcome.

Next, an update on Russia, China and India.

At a recent regional summit, Russia, China and India sparked speculation about their growing unity and potential challenge to US global leadership. While these geopolitical shifts deserve attention, they typically unfold slowly, allowing markets time to adapt. Even if this alliance eventually impacts stocks, investors shouldn't make hasty decisions today. Stock markets price in expectations for the next 3-30 months, and anything beyond that time frame involves too many unknowns for efficient market pricing. America maintains its economic dominance through sophisticated financial markets, supported by robust legal frameworks for investor protection and property rights. Other nations still have considerable ground to cover before meaningfully challenging this established order, providing markets ample time to adjust to any future changes.

Finally, a note on bond markets.

Recent bond yield increases across the US, UK, Germany and France have captured headlines and raised concerns about each nation's economic prospects. In our view, recent yield moves across developed economies aren't driven by country-specific factors. We believe they reflect global market movements as developed world bond yields are highly correlated. With central banks cutting rates while long-term yields rise, yield curves have steepened, particularly outside of the US, creating an economic environment that historically suggests faster growth ahead. However, instead of celebrating this development, many bond market observers are concerned. This likely stems from investors viewing bonds as stable investments, though "less volatile" doesn't mean no volatility. Bond markets naturally fluctuate based on global economic drivers and shifting investor sentiment. And that's it for this week. Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday. You can also visit fisherinvestments.com anytime for our latest thoughts on markets. Thanks again for joining us and don't forget to hit like and subscribe!