Stocks most affected by tariffs showed a muted reaction to a pending Supreme Court decision. This suggests investors believe the executive branch could use other authorities to maintain tariffs and that any potential refunds from an overturn would take years to materialize, diminishing the news's immediate market impact.

In an era of financial repression and heavy government intervention, the most effective investment strategy is to identify sectors receiving direct government support. By positioning capital near these "money spigots," investors can benefit from policies designed to manage the economy, regardless of traditional market fundamentals.

Because U.S. tariff levels are likely to remain stable regardless of legal challenges, the more critical factor for the long-term outlook is how companies adapt. Investors should focus on corporate responses in capital spending and supply chain adjustments rather than the tariff levels themselves.

Current equity market strength relies on a favorable policy mix. However, an underlying risk is the lack of any political path to address elevated U.S. deficits. This places the entire burden on continued economic growth to manage fiscal issues. If growth falters, these deficit concerns could emerge as a major risk factor.

The current expectation for legislative stalemate could be completely upended by a significant economic downturn. A recession would make fiscal stimulus more politically appealing to both parties, consistent with historical patterns, creating an environment for policy action that otherwise seems unlikely given the political landscape.

With major US policy variables like tariffs and fiscal stimulus now more defined, investors should shift focus from predicting policy direction to analyzing how businesses and consumers react to these established policies, as this will drive market outcomes.

The traditional relationship where economic performance dictated political outcomes has flipped. Now, political priorities like tariff policies, reshoring, and populist movements are the primary drivers of economic trends, creating a more unpredictable environment for investors.

Even if Democrats win the House, their majority would likely be too slim to significantly change policies that impact market pricing. Similarly, a plausible Republican agenda like more tax cuts would face internal party opposition from fiscal hawks, suggesting a continuation of policy gridlock regardless of the outcome.

The long-standing American political consensus favoring lower trade barriers has been replaced. Industrial policy, with active government shaping of key sectors via tariffs and investment, is now a durable, bipartisan strategy seen under both Trump and Biden administrations.