The Supreme Court heard two-and-a-half hours of arguments on the legality of Trump-era tariffs today. 

I ran the full transcript through several top AI models. And here’s how the models expect the Court to land …

OpenAI’s ChatGPT-5: Projects a 7–2 split against the government; (International Emergency Economic Powers Act) IEEPA’s “regulate importation” does not authorize revenue-raising tariffs.

Google’s Gemini 2.5: Sees a majority for the challengers, likely 6–3 or 5–4, holding IEEPA doesn’t authorize tariffs.

Anthropic’s Claude Sonnet 4.5: Expects 6–3 or 7–2 against the government; “regulate importation” doesn’t include imposing tariffs to raise revenue.

Perplexity: Anticipates 6–3 or 5–4 against broad presidential tariff authority under IEEPA.  Many Justices expressed skepticism about finding such broad power in the “regulate importation” language of the statute, without explicit Congressional authorization.

xAI’s Grok: Goes 8–1 against the administration, potentially forcing reliance on narrower authorities (like Section 232) and even phased refunds.

Bottom line from the models:  consensus view is a majority vote against Trump tariffs. 

So, would that undo the past 10 months of deal-making or unwind the global realignment achieved under Trump’s use of tariffs as negotiating leverage? 

It shouldn’t. 

Many of the deals are locked in, via bilateral agreements.  Some already fit into this “narrower” authority, where tariffs on things like steel and aluminum are legal under section 232 of the Trade Expansion Act of 1962, as threats to U.S. national security.  And broadly, the expectation is that there will be a migration to other statutes which support the tariff strategy — that just weren’t as convenient and as quick to execute as IEEPA.

With the above in mind, we get a move in Treasury yields today (higher), as markets reconsidered the deficit/revenue path — given potential refunds and a weaker outlook on tariff revenue.

In yesterday’s note, we talked about the concern over “intra-industry” funding among the AI giants.

It’s feeding fears of an AI bubble.

But as we discussed, it looks more like a feature of the AI infrastructure boom, not a bug.  By coordinating capital, compute capacity and AI deployment, the momentum in AI infrastructure development continues, and with that, the probability that America wins the race for global AI leadership increases.

And when the point of overbuilding/overspending is hit, the hyperscalers will dial back capex, which just means their free cash flow goes UP (which is already in the 10s of billions of dollars every quarter).  

They are already cash flow machines.  When AI adoption is widespread (and data centers are humming around the clock) they will generate even more cash.

More broadly, two-thirds of the S&P 500 have reported Q3 earnings, and the numbers are very good: 83% have beaten earnings estimates and 79% have beaten revenue estimates.  And earnings growth is tracking near 11%, which would be four consecutive quarters of double digit earnings growth.

So, earnings are good.  The economy is good.  The Fed is in an easing cycle.  All good for stocks.

That said, we spent some time last month talking about the setup for a technical correction in stocks.  And there were technical and fundamental reasons to believe Nvidia would lead it.  Nvidia did have a 10% correction over nine short days.  Broader stocks had a much shallower decline.

But we still have this chart from FactSet on valuation …

Last week (October 29th), the forward P/E on the S&P 500 was above 23.  As you can see, that’s happened only one other time on this chart — on September 2, 2020. 

What happened on September 2, 2020?   

Stocks started a 10% correction on that day, for a duration of 15 days peak-to-trough.  And that correction came after the 65% rise from the March 2020 lows (the depths of the covid lockdown-induced crash in stocks).

The economy was bouncing back very strongly.  There was war rhetoric around China.  But this was a technical correction.

So, given this valuation data point, are we in the early stages of a technical correction for stocks right now? 

If we look at the October 30th high in the S&P 500, it did come with an outside day (a technical reversal signal).  Stocks are down 3% since.

As we discussed last month, the garden variety 10% corrections of the past two years have resulted in a Fed reaction (either signaling or direct policy action).  In the current case, that would mean the Fed restoring expectations of a December cut.    

As we discussed yesterday, Jensen Huang delivered some big news on stage at Nvidia’s developers conference in DC — and it may have cleared the way for a melt up in stocks.

Why?

Let’s revisit this chart we looked at after Nvidia reported in earnings back in August.

Despite that, around those earnings the stock could only manage a choppy 11% pullback from all-time highs.

And now the top has been blown off.

What changed?

From what Jensen said on stage yesterday, the data center growth rate for Nvidia is about to rebound sharply.

That signal from the most important company in the world is a greenlight for markets and for the acceleration of the tech revolution.

Add to that, we heard from three of the tech giants today on earnings.

As you likely know, the “AI bubble” talk has been hot and heavy in the media, but it remains (quarter after quarter) hard to find things not to like with the tech giants.

The blended Google (Alphabet), Meta and Microsoft would be a rule of 57 company (average 18% revenue growth + 39% operating margin), trading at 32x earnings (ttm).

Together they’re deploying aggregate capex of $69 billion a quarter (which only widens the competitive moats) and still producing aggregate free cash flow of $61 billion.  Even if they were lighting the capex dollars on fire every quarter, the valuations still wouldn’t be stretched.

So, we have this reset on the Nvidia outlook, and what looks like a new leg of “melt up” in stocks — and then the Fed comes in today, cutting rates into it.

With that, not too surprisingly, Jerome Powell did his best to try to counter the market excitement.

In his prepared remarks, he said “a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”  Then he said it again, in what looked like a planted first question from Nick Timiraos, the Fed-cozy WSJ reporter.

Powell followed with “there’s a growing chorus now … feeling like this is where we should at least wait a cycle…”

Bottom line:  The Fed can talk tough, but with a rebound in Nvidia growth coming and with the cash machine tech giants continuing to self-fund the AI build-out, the melt-up scenario looks likely — if no shakeup from the Trump–Xi meeting.

As we discussed in my last note, while the rhetoric on U.S./China relations heated up over the past two weeks, it seems the Trump administration would be happy to kick the can down the road again, with another “pause” on tariff escalations.  That would buy time to execute the domestic agenda under some relative global stability.

The meetings over the weekend between high level trade reps suggest that indeed will be the outcome.  That expectation has been set going into Thursday’s meeting between Trump and Xi.

With that, stocks broke out to new record highs today.  And the bubbling risk signals of just 10 days ago have now seemingly quelled.

We’ve been watching a technical reversal signal in gold.  So far that has predicted a 9% fall in gold prices over just the past six days.

And today, we get a break of this big trendline …

Remember, we followed this parabolic move in gold over the past six weeks.  The timeline mapped closely to the EU’s plan to send €140 billion of frozen Russian assets to Ukraine.

And as we discussed, if a nation’s money can be confiscated, the trust that underpins all fiat currency (a government IOU) is weakened.

It safe to say China has been watching closely.  They hold roughly $730 billion of U.S. Treasuries — and gold is the safe haven outlet.

Not coincidentally, the top in gold at this point aligns with the reports out of the IMF and World Bank meetings ten days ago — that said the Trump administration would not support the EU’s plan to use (confiscate) Russian assets.  Trump reiterated that stance today in a press conference on Air Force One.

Again, that reduces the “confiscation/distrust premium” in gold.

Adding fuel to the gold correction, as we head into the Fed this week, inflation expectations have been on the move, lower.

What the Fed cares most about is losing control of inflation expectations.  Clearly, that’s not happening.

As you can see, at 2.19% it’s tracking toward 2%, it’s back to May levels, and it’s below the levels of last September, when the Fed started the easing cycle with a 50 basis point cut.

We’ve talked about the reversal in the precious metals.

For gold, a technical reversal signal came on Friday when the CME raised margin requirements.

And then yesterday, gold had one of the steepest one-day declines of the past 45-years.

As we’ve discussed, margin increases have often been a common trigger, or fuel on the fire, behind those extreme one-day declines dating back to 1980.

Another common theme, deflationary forces.  Even in these rare, extreme selloffs, the drag of deflationary forces on gold prices has outweighed the safe-haven feature.

With that, let’s take a look at this very important chart.

This is the ratio of gold prices-to-oil prices.  As you can see, we are at an historic extreme (the far right of the chart).  The only more severe period was during the covid lockdowns, when oil prices went negative!

So, what is this telling us?

Well, while gold prices have gone parabolic (UP), oil prices have fallen 12% over the past month, breaking down from the low-end of a four year trading range.

The move in oil is not only a deflationary signal, but it’s also a deflationary force.  The persistence of low oil prices, and now this leg lower, will feed into headline CPI.

We know from real-time CPI inputs (like new and used cars, rents) that prices have been flat, and in some cases down.  The government’s report just hasn’t caught up … yet.

With that, given the Fed’s slow path to ease, real rates (Fed Funds Rate minus inflation) seem to be rising in the underlying economy (i.e. a tightening effect, as actual inflation may be falling faster than the Fed Funds rate).

And rising real rates have historically marked points of exhaustion for big gold runs.

All of this said, oil bounced sharply today (up about 4%) after the Energy Secretary said it was a good time to restock the Strategic Petroleum Reserve, and after the White House announced new sanctions on Russian oil companies this afternoon.

So, we may be seeing the first signs of a floor in oil — and with it, perhaps the first sign of a cap in gold (and the normalization of this ratio).