The Supreme Court Just Played Rope-a-Dope With the Markets—And Wall Street Hasn't Even Noticed

Everyone is pretending this week was normal. The S&P 500 hit a record close on Friday. Semiconductors rallied. Bitcoin bounced above $91,000. Gold climbed nearly 2%. The Nasdaq jumped 0.8%. All the self-congratulating commentary about "strong earnings" and "Fed patience" flowed like champagne at a hedge fund gala.

Here's what actually happened: The Supreme Court ghosted the market on Trump's tariffs, the labor market showed up weaker than expected, and Treasury Secretary Scott Bessent basically admitted on Thursday that if SCOTUS rules against the administration, the government would have to issue refunds on roughly $100 billion in tariffs already collected. The market priced all of this as a reason to buy. Wild.

Let's be precise about what the silence from the bench on Friday means. The Court had "opinion days" scheduled—a procedural signal that rulings were possible. Markets circled January 9th like it was an earnings announcement. The financial press talked about tariff rulings the way people talk about weather forecasts. Then the Court released one opinion, unrelated to tariffs, and the entire apparatus moved on. The next opinion day is January 14th.

This is not inertia. This is a tell.

According to filings and expert commentary, the justices appeared skeptical during oral arguments in November. Conservative justice Neil Gorsuch, no enemy of executive power, essentially said Congress couldn't reclaim authority once it handed it over to the president. Chief Justice John Roberts invoked the bedrock principle that tariff-setting "has always been the core power of Congress." When even Trump's judicial appointees are showing visible doubts, you don't kick a decision down the road because you're confident in your position. You wait because you're uncomfortable.

The Peterson Institute caught this signal first. They noted that the Supreme Court's recent ruling in Trump v. Illinois—which blocked the administration's attempt to deploy National Guard troops without meeting statutory preconditions—followed the same separation-of-powers logic that would torpedo the tariff emergency order. The Court is moving methodically. It's not defiant. It's deliberate. And deliberation, in the context of a president whose approval rating dropped from 50-ish to 42% between April and December, is how courts historically dish out losses to weakened executives.

The refund question matters more than people seem to realize. Bessent estimated at least $100 billion in potential liabilities—some analyses run higher. If the Court narrows but doesn't eliminate the tariff authority, we get a "mishmash" outcome (Bessent's actual word). If it blocks the emergency powers invoked under the International Emergency Economic Powers Act, the Treasury either pays up or pivots to the Trade Act of 1962, a framework with different scope and conditions. None of these scenarios look like victory laps.

Kalshi, the prediction market, currently prices the odds of a favorable ruling for Trump at 28%.

And yet: stocks closed at all-time highs. The 10-year Treasury yield didn't budge, staying flat at 4.18%. Futures shrugged. The market behaved as though tariff uncertainty had been resolved—only, the opposite happened. The uncertainty just extended itself.

The employment report gave the markets legitimate cover, sure. December saw only 50,000 jobs added, below the 70,000 consensus. That number sealed the view that the Fed will hold rates steady in late January and likely won't cut again soon. Lower-for-longer on rates usually means higher stock multiples and cheaper mortgage financing. Trump even greenlit Freddie Mac and Fannie Mae to purchase $200 billion in mortgage-backed securities, a move designed to prop up real estate in the shadow of affordability concerns.

But here's the disconnect: Rate stability is not the same as policy stability. The labor market softness combined with rising tariff uncertainty should, in theory, create hedging demand. Instead, retail traders—accounting for 60% of OCC customer volume according to Citadel Securities—are lever-long and confident. Institutionals are skewing risk-on across Energy, Utilities, Real Estate, and Materials, the very sectors most vulnerable to tariff regime shifts. Crypto is rallying on the assumption that a Trump-friendly regulatory environment survives whatever the Court does.

One-month implied correlations are hitting one-year lows. The market has fragmented. That sounds healthy—"stock-pickers markets return!"—until you realize that fragmentation often precedes a regime shift. When 60% of retail volume is directionally bullish and positioned in illiquid corners of the market, and the macro substrate shifts beneath them, correlations don't stay compressed. They snap back violently.

Bitcoin hit $91,798 this week. The Bernstein analysts' declaration that crypto has "bottomed" at the $80,000 level now anchors expectations. Tom Lee predicted a January all-time high above $126,000. Fundstrat expects mid-$115,000 by year-end. These aren't fringe voices—they're capital-allocating analysts with platforms. Retail is pricing in a $150,000+ Bitcoin before spring. The moment the Supreme Court rules against tariffs, or even muddies the waters, risk-off cascades could find these positions crowded and vulnerable.

Real talk: The S&P 500 is 6,800-ish now. Wall Street consensus for year-end 2026 clusters around 7,500-8,000, with the bullish outliers (Oppenheimer, Deutsche Bank) calling for 8,200. That's 10-20% upside from here. It's plausible on earnings growth. It's not absurd. But it requires tariff resolution to favor the administration, Fed patience to hold through inflation data, and retail capital to keep flowing into fractured micro-cap thematic rallies (Quantum Computing, Robotics, Space—yes, Space).

The labor market is cooling. The Court is signaling skepticism. The tariff book is now 4,500+ pages, the longest on record. Treasury complexity is exploding. Corporate input costs remain elevated. And the market has priced this as "buy the dip."

Freddie and Fannie can't print homebuyers forever. The Supreme Court's next opinion day is Tuesday, January 14th. Until then, we're all just pretending the umpire isn't warming up in the bullpen.

Stay skeptical. The market is sleeping on something big.