Dear all

Happy Chinese New Year! Gong Xi Fa Cai!

I am doing my usual work preparation over the weekend so as to provide timely updates to my clients. As I have a little bit of time, I decide to post on my blog too.

Recent developments surrounding the U.S. Supreme Court ruling on tariffs introduce another layer of uncertainty into the market, even though the initial equity reaction was positive.

1️⃣ Supreme Court Ruling & Tariff Implications

The U.S. Supreme Court has struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). However, several important considerations remain:

• President Donald Trump is unlikely to retreat from tariffs as a policy tool. Historically, tariffs have been central to his negotiation strategy and economic stance.
• Not all tariffs are affected:
  • Section 232 of the Trade Expansion Act (1962) — National security-related tariffs remain.
  • Section 301 of the Trade Act (1974) — Tariffs related to unfair trade practices remain.
• Over the weekend (SG time), President Trump:
  • Imposed a 10% global tariff under Section 122 of the Trade Act (1974) effective 24 Feb.
  • Subsequently raised this to 15%.
  • Section 122 allows temporary tariffs (up to 150 days), subject to Congressional extension.

This suggests tariff headlines are likely to continue.

2️⃣ Additional Uncertainties

• Trading Partners: Countries that negotiated deals under IEEPA-imposed tariffs may now face renewed ambiguity.
• Refund Question:
  • Bloomberg estimates approximately US$170 billion in tariff revenue may be subject to refund.
  • The Court did not clarify refund mechanics.
  • Importantly, any refunds would go to the importer of record, not foreign exporters.

This potentially adds a second layer of policy and legal uncertainty.

3️⃣ Market Reaction

The Nasdaq Composite closed only 0.9% higher last Friday.

• If this ruling had occurred 9 months ago, the rally might have been materially stronger.
• This suggests tariff concerns are no longer the market’s primary driver.
• However, restarting the tariff process may reintroduce volatility.
• That said, it may now be more difficult to impose extreme measures (e.g., 100% tariffs) abruptly.

4️⃣ Federal Reserve Developments

Recent signals from the Federal Open Market Committee (FOMC) show:

• Discussion of a possible rate hike if inflation remains stubborn.
• Core PCE data surprised to the upside.
• Rate cut expectations may be pushed further out.

Additionally, market history suggests:

• The S&P 500 has declined ~16% on average in the six months following the appointment of a new Fed Chair (Barclays data).
• Markets often “test” new Fed leadership with volatility.

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📌 Overall View in the next few months

• Tariff risk is resurfacing, but it may not be the market’s dominant concern.
• Policy uncertainty remains elevated.
• Rate expectations are shifting hawkishly.
• Volatility risk is increasing as monetary and trade policies intersect.
• Potential near-term “information vacuum as the majority of U.S. and Singapore-listed companies have largely reported results.
• Nasdaq and Hang Seng Tech index charts look weak, especially the latter. I am happy to accumulate Hang Seng Tech Index ETF on weakness via tranches.
• The Singapore market has staged a strong rebound, with the Straits Times Index (STI) and the FTSE ST Small Cap Index rising approximately 10.4% and 8.6% respectively from their 17 Dec lows.
• Notably, the STI closed at a record high of 5,018 on 20 Feb.
• Given the magnitude of the rally over the past two months, it may not require a significant catalyst to trigger bouts of profit-taking in the near term.

♟️ Ernest’s personal closing comments

At this juncture, portfolio positioning should balance market participation with prudent risk management.

For context, I am currently less than 50% invested in equities, having reduced exposure into recent strength.

That said, investment approaches differ. What aligns with my risk tolerance and strategy may not necessarily be suitable for everyone. Each portfolio should reflect individual objectives, time horizon, and risk appetite

Have a blessed and prosperous Fire Horse Year ahead! 😊

Disclaimer

Please refer to my disclaimer HERE.