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investing.com -- Recent policy moves by the Trump administration are unlikely to derail the ongoing U.S. equity rally, according to Wolfe Research analysts.
While markets have focused on tariffs, Fed independence, and stimulus measures, Wolfe said that some of these policy narratives are “overrated” and that equities are positioned to absorb near-term developments.
On tariffs, Wolfe highlighted the possibility of major refunds dating back to July, following a recent appellate court ruling.
Analysts noted that while some commentators view a Supreme Court ruling against tariffs as a “bond market disaster,” they expect markets to “shrug off the one-time cost of tariff refunds.”
Wolfe added that even if Trump loses in court, he could “recreate the tariffs prospectively through other authorities,” limiting long-term disruption.
Regarding the Fed, Wolfe said the potential firing of Governor Cook is unlikely to cause immediate market disruption.
“There is good evidence on the long-term costs of eroding central bank independence, but it’s much less obvious when negative consequences will emerge,” they said, adding that markets are expected to “take this in stride over the next few months.”
The analysts also pointed to underappreciated stimulative effects from the “One Big Beautiful Bill,” noting that recent payroll weakness may be partly due to immigration restrictions rather than true demand weakness.
Wolfe suggested that the combination of policy and labor dynamics sets up “economic reacceleration into 2026.”
While acknowledging long-term concerns, including tariff impacts and fiscal pressures, Wolfe concluded that “near-term DC policy will not directly break the back of the ongoing rally in US equities,” and that the policy environment through the end of the year looks “fairly constructive for markets.”