📊 Score Drops to Neutral Overnight — Before the GDP Bomb Landed
Something shifted in the early hours of Friday morning. Between 4:00 and 6:00 AM ET, the Edge Of Markets score slid from 5.31 (Constructive) all the way down to 5.17 (Neutral: 30% QQQ / 70% Cash). That's the biggest single-session drop we've seen in weeks — and it happened before the GDP report dropped at 8:30 AM.
The model was reading deteriorating economic conditions in the data before the headline number confirmed it. Q4 GDP came in at a miserable 1.4% — well below the 2.5% consensus — and core PCE inflation ticked up to 3.0%. The worst of both worlds: slowing growth and sticky inflation.
QQQ is trading around $608.90, below the 70-day EMA at $615.68. No override — we follow the score directly.
Final Recommendation: 30% QQQ / 70% Cash
The score went defensive before the data confirmed the weakness. That's the model doing its job. The question is whether the market cares.
⚖️ The Supreme Court Just Blew Up Trump's Tariff Regime
In a landmark 6-3 decision, the Supreme Court ruled that President Trump exceeded his authority when imposing sweeping global tariffs under the International Emergency Economic Powers Act (IEEPA). Chief Justice Roberts wrote the majority opinion, with Thomas, Alito, and Kavanaugh dissenting.
This is massive. Trump's entire trade policy architecture — the tariffs that rattled supply chains, jacked up consumer prices, and kept CEOs guessing for months — just got gutted by the highest court in the land. The ruling doesn't nuke every tariff (Section 232 steel/aluminum tariffs remain), but it invalidates the broadest and most disruptive ones.
The market's reaction? Instant relief rally. Trade-sensitive stocks popped hard:
- Alphabet (GOOG): +4% as tariff-driven inflation fears eased
- Amazon (AMZN): +2% on lower import/logistics cost expectations
- S&P 500: +0.7% to ~6,911
- Nasdaq: +0.9% leading the charge
Fair enough. Removing tariff uncertainty is genuinely bullish for corporate margins and consumer prices. But there's a problem: the market is celebrating the tariff ruling while completely ignoring the economic data released the same morning. And that data was ugly.
📉 GDP at 1.4%: The Economy Is Slowing and Nobody Seems to Care
Let's talk about the number Wall Street is conveniently glossing over. Q4 2025 GDP came in at 1.4% — nearly half the 2.5% consensus estimate. This is a sharp deceleration from Q4's 4.4% pace. Full-year 2025 GDP was 2.2%, down from 2.8% in 2024.
Yes, the government shutdown subtracted about 1 percentage point (federal spending cratered -16.6%). So you can argue the "real" number was closer to 2.4%. But even 2.4% represents meaningful deceleration, and the shutdown's effects ripple through government contractor spending, consumer confidence, and delayed economic data.
Then there's the inflation kicker: core PCE rose to 3.0%, up from 2.8% and above the 2.9% consensus. The Fed's preferred inflation gauge is moving in the wrong direction. This isn't a Fed that's about to rush to cut rates. This is a Fed that's stuck — growth slowing, inflation sticky, and no easy answer.
The textbook term for this is stagflation. And the last time markets had to price in stagflation risk, it didn't end well for tech multiples.
🛒 Walmart's Warning: The Consumer Is Cracking From the Bottom Up
Yesterday Walmart beat on earnings (74 cents vs. 73 cents expected) but issued guidance that made Wall Street wince. Full-year EPS guidance of $2.75-$2.85 came in well below the $2.97 Street estimate.
The details were worse than the headline. Walmart's CFO pointed to a "hiring recession", rising student loan delinquencies, and trade uncertainty. The majority of market share gains came from households earning over $100K — meaning wealthier shoppers are trading down to Walmart while lower-income families are running out of room to cut.
This is the K-shaped economy in real time. The top half of America is fine. The bottom half is paycheck-to-paycheck and deteriorating. Walmart — the company that sees American spending before anyone else — is telling you to be careful. Maybe we should listen.
🎯 My Take: The Market Is Trading Headlines, Not Data
Here's the disconnect that's bothering me: the market is rallying because SCOTUS removed tariff uncertainty, and I get it — that's genuinely good news for trade-dependent companies. But it's treating the tariff ruling as if it erases a 1.4% GDP print, 3% core PCE, and Walmart telling you the consumer is cracking.
The score dropped to Neutral at 5.17 before any of this news broke. It was responding to the aggregate weight of deteriorating economic indicators — the same indicators that produced today's GDP miss. The market can celebrate a court ruling all it wants, but the ruling doesn't fix GDP growth, it doesn't cool inflation, and it doesn't put money back in consumers' pockets.
QQQ is below its 70-day EMA. The score is Neutral. The economic data is weakening. And the market is up because tariffs got struck down. One of these narratives is going to win out — and historically, the data catches up to price, not the other way around.
I'm not calling today's rally stupid. Tariff removal is a real positive. But rallying on the day you learn the economy grew at 1.4% with rising inflation? That's the market saying "I don't care about problems I can't see from the highway." The exit signs are there. The score sees them.
⚠️ Bottom Line: Celebrate the Ruling, Respect the Data
The SCOTUS tariff decision is the kind of structural positive that should support markets over time. Removing trade uncertainty is unambiguously good for business planning and consumer prices. Give it its due.
But today also delivered the worst GDP print in over a year, core inflation heading the wrong way, and America's largest retailer saying "we're being cautious because the consumer is stressed." That doesn't vanish because of a court ruling.
Score: 5.17 (Neutral: 30% QQQ / 70% Cash). QQQ below the 70-day EMA. No override. The model says stay light.
Key levels: QQQ needs to reclaim $615.68 (EMA 70) to shift the technical picture. Watch next week for Fed commentary on the GDP/PCE combo — if they signal rate hikes are back on the table, this rally evaporates fast.
The tariffs are dead. Long live the data.