Author: Montecito Capital Management
For the week ending February 20, U.S. equity markets stabilized and moved modestly higher as investors welcomed greater clarity around trade policy, even amid lingering uncertainty. The S&P 500 rose 1.1%, the Dow Jones Industrial Average gained 0.3%, and the Nasdaq Composite outperformed with a 1.5% advance.
Early-week volatility reflected ongoing concerns around growth momentum, interest-rate expectations, and positioning after recent drawdowns, but sentiment improved materially following the Supreme Court’s ruling against the administration’s use of emergency authority to impose broad tariffs. Markets viewed the decision as constructive not because tariffs disappear entirely, but because it meaningfully reduced the risk of abrupt, sweeping trade actions that had weighed on multinational earnings visibility, supply chains, and inflation expectations.
While President Trump subsequently signaled plans to pursue a more limited 10% tariff framework under alternative authority, investors interpreted the shift as a move toward a narrower, more predictable policy regime. That combination — reduced tail risk, improved policy transparency, and a less inflationary outlook — helped support risk assets into weekend, particularly in technology and other globally exposed sectors.
