Marina Lyubimova
U.S. stock markets are bracing for major volatility this week as the Supreme Court prepares its ruling on tariff policy. JPMorgan's trading desk has mapped out four distinct scenarios for how the SPX might react, with outcomes ranging from modest pullbacks to rallies pushing close to 2%. The decision carries weight not just for immediate price action, but for interest rate expectations and cross-asset positioning across the board.
JPMorgan Maps Four Probability-Weighted Scenarios
According to Walter Bloomberg's reporting, JPMorgan has assigned probabilities to different court outcomes and their likely market impact. The most probable scenario, at 64%, involves tariffs being struck down but immediately replaced with alternative measures. In this case, the bank expects an initial pop of 0.75% to 1% in the SPX, followed by a smaller secondary gain of 0.1% to 0.2%.
The second scenario carries a 26% probability: tariffs get upheld entirely. That would likely trigger a 0.3% to 0.5% drop in equities while sending ripples through the yield curve - similar to when SPY drops after tariff announcement rattled markets last year. A third outcome, given just 9% odds, envisions tariffs being removed after the midterm elections. This could drive the SPX up by 1.25% to 1.5%, with the Russell 2000 leading the charge.
The Bullish Outlier and Revenue Reality
The most optimistic case - tariffs struck down with no replacement - sits at just 1% probability but could deliver the biggest punch: a 1.5% to 2% rally in the SPX. However, there's a practical constraint that might limit how far markets can run. The U.S. has already pulled in roughly $124 billion in tariff revenue through January, and any replacement levies would likely keep effective rates close to 2025 levels to maintain that income stream. Historical precedent shows how a tariff ruling sparks market rally, but sustainability depends on policy details.
The decision's impact extends beyond the immediate SPX move because tariff policy influences interest rate expectations, liquidity conditions, and cross-asset positioning, notes JPMorgan's analysis.
Why This Ruling Matters Beyond the Initial Move
Market direction won't just depend on what the court decides - it'll hinge on how fast policymakers roll out alternative measures afterward. The broader debate over US tariff power continues to shape not just equity valuations but currency markets, Treasury yields, and corporate planning cycles.
For traders watching the SPX this week, the key isn't just preparing for the initial reaction - it's understanding that the follow-through depends on what comes next from Washington.
Marina Lyubimova
