Marc Chandler - Supreme Court Tariffs, Fed Power Plays, and Global Capital Flows
The KE Report Jan 16, 2026
Summary
The Supreme Court is expected to strike Trump's emergency-powers tariffs as overreach, but a 'Plan B' likely keeps tariffs alive in some form through 2026.
U.S. manufacturing output rose 0.2% in December while 75,000 factory jobs were lost in 2025 — automation, not reshoring, is the real story.
Fed funds futures price just 45 bps of cuts in 2026 — back-loaded into the second half — while the 10-year yield breaks above 4.20%.
BOJ verbal intervention is breaking the one-way yen trade: dollar-yen fell even as the U.S. 10-year yield rose 5 bps on the day.
WTI broke $62 on Iran strike fears but faded to roughly $59 after Trump signaled de-escalation, leaving oil range-bound near $60.
Marc Chandler's takeaways
- Top takeaway Marc frames 2026 as the reverse of 2025 — firm dollar and a firm economy early in the year, then weakness with Federal Reserve rate cuts back-loaded into the second half; Fed funds futures were pricing 45 bps of cuts as of Jan 16, down from 50 bps earlier in the week.
- He expects the Supreme Court to rule the emergency-power tariffs were an overreach — a decision the market is waiting on — with a knock-down set to lift stocks and an uphold set to sell off stocks and the dollar on the view that the president would become emboldened.
- He argues tariffs have lifted measured inflation by roughly 0.6% per month (not annualized), per Fed and private-sector economists, meaning the Fed may have cut more in 2025 without them — a frame that anchors his rate-cut outlook.
- TIC data show $212B of net foreign inflows into U.S. stocks and bonds in November 2025; he argues foreigners were mostly hedging dollar exposure last year rather than selling U.S. assets, which he says explains the dollar's resilience despite the trade noise.
- Manufacturing output rose 0.2% in December vs. an expected -0.1% for back-to-back monthly gains, yet the U.S. lost about 75,000 manufacturing jobs in 2025 — he reads that gap as automation, not reshoring, reshaping the impact of tariff policy.