Two Imminent Decisions Will Define the Rest of the 2020s

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By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

Will the Supreme Court drop a tariffs bombshell tomorrow?
The battle of the “Two Kevins” is heating up at the Fed
Two extreme, opposite paths may lie ahead
Each path requires a different strategy
10 stocks to buy for a more stable world

Washington is at a crossroads…

The next few weeks could determine whether markets spend the rest of the decade in a low-volatility grind higher…

Or in a roller coaster of shocks, reversals, and policy whiplash.

That’s down to imminent decisions at two of America’s most powerful institutions.

The first is at the Supreme Court. As soon as tomorrow, it could rule on whether President Trump’s sweeping tariffs overstep his legal authority.

A ruling against the him would throw up real roadblocks to the new tariff regime. And judging by the market crash right after the Liberation Day announcement on tariffs last April, investors may celebrate that ruling.

Of course, that wouldn’t be painless. Unwinding trade levies would be disruptive in its own right. And the White House would undoubtedly fight back.

Nevertheless, a ruling against the administration would force trade policy back into slower, more predictable channels… reducing uncertainty.

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The window for preparation isn’t just closing – it’s slamming shut.

What I’ve uncovered about the true impact of President Trump’s tariffs and DOGE initiative has left me deeply troubled. As someone who worked inside the Federal Reserve system and managed billions for America’s wealthiest families, I recognize the warning signs others miss. I urge you to see my urgent message immediately. The window for preparation isn’t just closing – it’s slamming shut. Watching this may be the most consequential few minutes you spend this year.

The second big decision has to do with the Fed…

Before the end of the month, Trump is expected to name the next chair of America’s central bank to replace his 2017 pick, Jerome Powell.

Through the vetting process, Trump has been signaling clearly what he wants: lower rates, delivered faster.

Right now, betting markets show a dead heat between the “Two Kevins” – Kevin Hassett and Kevin Warsh.

Hassett, the current National Economic Council director, is closely aligned with Trump’s vision for rates. He’s consistently argued there’s room for much deeper rate cuts.

Warsh, on the other hand, is a former Fed governor. He still favors cuts, but he’s seen as more independent and credible. A Warsh-led Fed would likely move more cautiously… and be potentially more stabilizing for markets.

Here at TradeSmith, our beat is money, not politics. When we touch on policy decisions made in Washington, it’s to help you figure out how to turn them into opportunities.

So today, we’ll explore the first of the two most extreme, opposite paths forward: a Supreme Court decision that curbs the White House’s ability to impose tariffs, along with a Warsh-led Fed.

On Monday, we’ll explore another path – unrestricted tariffs and Hassett at the helm. (In tomorrow’s Daily, you’ll be hearing from our CEO, Keith Kaplan, in his regular Friday slot.)

As you’ll see, both paths create opportunity. But they require different strategies.

And as always, we’ll use TradeSmith’s tools and data analytics to show you how to navigate them.

The first path favors larger, more stable companies…

Let’s take each factor separately, then combine them into a single trading plan.

If tariff policy hits a roadblock, the companies most likely to benefit are large technology firms and global consumer brands.

These businesses sit at the center of the global supply chain. They source materials from around the world and sell their products across international markets.

When tariffs stop raising costs on both ends – inputs coming in and finished goods going out – profit margins improve, and earnings become easier to forecast.

We’ve seen this before.

After the peak of the first round of U.S.–China trade tensions in 2018, markets responded quickly once escalation slowed.

Volatility fell, and global trade-sensitive stocks rebounded, sending the S&P 500 more than 20% higher in 2019 after a sideways year beforehand.

On the monetary side, a slower and more deliberate pace of interest-rate cuts has typically favored higher-quality businesses over speculative, high-growth bets. Larger, more established companies tend to generate steady cash flow and rely less on cheap financing to justify their valuations.

Even still, those interest rate cuts appear to be coming, no matter who runs the Fed next. As I outlined in my Anti-Predictions piece back on Dec. 31, that’s likely to favor mid-cap stocks well before smaller-cap companies.

Here’s a useful stock screener for this setup…

TradeSmith’s Screener lets you use all our proprietary indicators in one place.

This allows you to focus on a narrow band of the stock market that’s pinging green on our most powerful tools.

Let’s set up a filter for stocks that are:

In the large-cap S&P 500 and the tech-heavy Nasdaq 100
In the Consumer Discretionary, Technology, and Industrials sectors
In the Long-Term and Short-Term Health Green Zones
Have a Business Quality Score above 70
Have a Quantum Score above 70

This whittles down a group of about 1,000 stocks to just 87. (TradeSmith Platinum users can create filters for these results and more on their desktops.)

Here are the top 10, sorted by Short-Term Health.

Our Business Quality Score (BQS) measures the durability of a company’s business model. Think margins, balance-sheet strength, earnings consistency, and debt levels.

Two of the stocks in our list of 10, Visa (V) and Mastercard (MA), score near the top of the scale on the BQS.

Next is Short-Term Health. This is where timing enters the picture.

Short-Term Health tracks near-term momentum and trend strength. It’s an innovation on TradeSmith’s classic Long-Term Health indicator but is tuned for more recent price action.

The green flags on the list above show how long a stock has been in its Short-Term Health Green Zone.

Short-Term Health buy signals – aka “flash buy” signals – are powerful signals that examine a stock’s most recent price action. The goal is spotting when selling pressure has exhausted itself and buyers are rushing back in.

In our backtesting, we found that stocks produced average annualized returns of 23.4% after Flash Buy signals.

Take defense and aerospace company General Dynamics (GD). It shows one of the most recent bullish signals in the group, along with heavy-duty vehicle maker Oshkosh (OSK).

Then there’s our Quantum Score, developed by former Wall Street trader Jason Bodner. It combines fundamental growth metrics with institutional money flows. A high score means a stock has solid fundamentals and is seeing usually large inflows from large, institutional investors.

Oshkosh also stands out again with the highest Quantum Score in the list. That shows us it’s right in the Big Money’s crosshairs. It also recently saw a Short-Term Health Buy signal – a winning combination.

The 10 stocks above are positioned to thrive in a world where trade policy become more predictable, and interest rates maintain a steadier path.

On Monday, we’ll explore how to position yourself if we get the opposite scenario – a green light on tariffs and potentially more dramatic rate cuts from the Fed. So watch out for that in your inbox at the usual time.

Two Imminent Decisions Will Define the Rest of the 2020s