This week, the Supreme Court ruled 6–3 that President Trump exceeded his authority in using a federal emergency powers statute to impose broad global tariffs. The issue was not whether tariffs are good or bad policy, but whether the executive branch had the legal authority to implement them under that specific statute. The Court said it did not.

What mattered next was the reaction. As expected, the administration did not retreat. It moved quickly to pursue similar trade objectives through different legal channels. A temporary 10% global tariff was announced under a separate section of trade law, and additional investigations are being prepared that could lay the groundwork for more targeted duties. The legal pathway changed, but the policy objective did not.

One unresolved question is what happens to previously collected tariffs. If courts ultimately require refunds, the amounts involved could be substantial. That possibility introduces an interesting wrinkle. Refunds would effectively return capital back into the private sector. In the short term, that functions like a form of fiscal stimulus layered on top of existing tax flows. This will become the new legal battle.

At the same time, geopolitical risk crept back into the conversation. Reports surfaced that the administration may consider limited military action against Iran if nuclear negotiations stall, with a short public deadline being discussed. Oil prices firmed in response, though they remain within their longer-term range. Crude has bounced but is still far from the types of levels that historically derail expansions. Supply conditions globally remain relatively comfortable, which matters more than headlines.

Underneath all of this, the economic backdrop appears stable on the surface. Growth has not rolled over. Corporate earnings have been better than feared, with roughly 75% of companies exceeding estimates and forward growth expectations ticking higher for next quarter.

But my bigger concern is not tariffs or even geopolitical flare-ups. It is the structural shift happening in the labor market. After the Bureau of Labor Statistics’ annual benchmark revisions, total job gains for all of 2025 were revised down to roughly 181,000. That is dramatically below earlier estimates and implies that job creation last year averaged only about 15,000 per month. That is barely replacement level for a growing labor force.

Even if interest rates move lower, I am not convinced it materially stimulates hiring in the way it has in past cycles. Companies are not hesitating because capital is too expensive. They are rethinking labor entirely. Artificial intelligence is being deployed not just to enhance productivity but to replace tasks, departments, and in some cases entire workflows. The speed of change is faster than most expected. We are already at the stage where AI systems are helping train other AI systems.

You can see the market trying to process this. Established software companies have fallen sharply. The iShares Expanded Tech-Software Sector ETF is down 23% this year, reflecting a broad repricing across the software space. I have never seen mature, widely owned companies revalued this quickly outside of a financial crisis. The issue is not balance sheet risk. It is revenue durability. Investors are questioning whether traditional subscription models can withstand rapid AI-driven disruption.

The impact is no longer confined to one niche. In just the past few months, AI pressure has moved across a wide range of industries. Most roles are not disappearing entirely. The shift is happening gradually. One task at a time. One process at a time. One function at a time. Over time, those adjustments add up.

As a result, more people are reassessing the durability of their skills. The question is not whether a job vanishes overnight, but which parts of it can be automated and which parts require judgment, experience, and human interaction. The practical response is adaptation. Individuals are asking how they can use this technology to increase productivity, deepen expertise, and distinguish themselves within their field.

The market rotation reflects this divide. Companies tied to physical assets, manufacturing, infrastructure, and services that cannot easily automate labor have surged. It is the mirror image of what has happened in software. The bear market in software stocks is real, not because earnings collapsed overnight, but because investors do not want to own perceived disruption victims. Valuations may look attractive on paper, but making that contrarian call requires conviction about what the competitive landscape looks like two to three years from now.

Capital flows tell the story. Money has been moving toward broader indices, equal-weight strategies, and international markets. International equities and the equal-weighted S&P 500 have outperformed. That shift is less about traditional valuation metrics and more about repositioning away from concentrated AI risk and U.S. dollar exposure.

The bigger question is when, or if, that narrative shifts. Does AI ultimately enhance margins across industries and create new categories of growth that offset labor displacement? Or does job growth stall further before the benefits are broadly shared? With job creation averaging only around 15,000 per month, the margin for error is thin. If that number turns negative, the social and political response could accelerate quickly.

This is not a typical cycle driven by credit excess or commodity spikes. It is a structural transition. The headlines this week were about tariffs and geopolitics. The deeper story is about labor, productivity, and how quickly technology is rewriting the rules of entire industries.

Have a great weekend!

Sources

• Supreme Court Ruling: Learning Resources, Inc. v. Trump (Feb 20, 2026). The 6–3 decision invalidated the use of IEEPA for broad global tariffs.

• Executive Action: White House Fact Sheet (Feb 20, 2026). Implementation of a temporary 10% global tariff under Section 122 of the Trade Act of 1974.

• Labor Revisions: Bureau of Labor Statistics Annual Benchmark Revisions (Feb 11, 2026). 2025 job gains revised to 181,000.

• Market Performance: iShares Expanded Tech-Software Sector ETF (IGV) decline of 23% year-to-date as of Feb 19, 2026.

Disclaimer

The information provided in this communication is for informational purposes only and does not constitute financial, investment, or legal advice. All content is based on data and sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Market conditions and economic factors are subject to rapid change. Past performance is not indicative of future results. The views expressed herein are those of the author and do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The author may hold positions in securities mentioned in this post.

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