The economy of the United States has continued to expand at a moderate pace over the past few months; however, according to a Research, a hypothetical decision by the Supreme Court to eliminate tariffs could significantly alter the risk landscape. The chief global strategist, Peter Berezin, stated, “Our analysis of alternative data suggests that the United States economy has continued to expand at a moderate pace over the past two months.” Should the Supreme Court decide to overturn the tariffs, the probability of a recession in the near term would diminish, whereas the chances of the economy experiencing overheating would rise.

Berezin noted that the expansion of employment “remains weak while job openings continue to decline,” even though initial claims for unemployment have stayed “reasonably below average.” The company characterized the rise in layoff announcements as “concerning,” while also warning that it remains vigilant for signs of a broader decline in the labor market. Despite the ongoing weakness in the residential real estate market, the analyst observed that declining mortgage rates are beginning to “buoy activity.” Conversely, while there has been a slight uptick in capital spending intentions, they still “point to sluggish investment growth.”

Berezin noted that the sustainability of the AI capital spending boom remains in question. He expressed skepticism, stating, “We doubt that AI companies will generate enough revenue to cover their capex costs.” He stated that “much of the apparent excess demand for AI resources would go away if companies such as OpenAI priced their services appropriately.”

He stated that “stock prices and bond yields will fall” if the Supreme Court decides to sustain the tariffs. Conversely, should tariffs be reversed, “bond yields will rise even further, but stock prices could eventually retreat as the risks of overheating escalate.”