How a Recent Supreme Court Decision Could Undermine the Stock Market's Biggest Bull Case for Trump's 2nd Term
Sunday, Jan 5, 2025 4:19 pm ET
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The stock market has been bullish on the prospect of a Trump 2.0 presidency, with investors anticipating a continuation of his administration's policies. However, a recent Supreme Court decision could potentially undermine this optimism and pose significant risks to the market's biggest bull case. The decision in question is the Myriad Genetics case, which held that human genes could not be patented, directly affecting the company's business model and leading to a significant drop in its stock price.
The Myriad Genetics case highlights the potential impact of Supreme Court decisions on individual stocks and the broader market. The study by Daniel Katz and his colleagues found that between 1999 and 2013, 79 Supreme Court rulings had identifiable effects on the market, leading to more than $140 billion in absolute changes in wealth. The most impactful cases resulted in companies' stocks soaring or plummeting by billions in a matter of hours. This demonstrates the significant influence that Supreme Court decisions can have on the stock market, particularly when they directly relate to a company's business model or industry regulations.
The Myriad Genetics case is just one example of how Supreme Court decisions can impact the stock market. Other cases, such as United States v. Locke and Williamson v. Mazda, have also had substantial effects on individual stocks and the broader market. In the Locke case, the Supreme Court's decision greatly reduced Exxon Mobil's potential liability for the Exxon Valdez oil spill, increasing the company's stock by $23 billion. Conversely, the Williamson v. Mazda case reduced Mazda's stock by over $5 billion.
The potential impact of Supreme Court decisions on the stock market is not limited to individual stocks. The study by Katz and his colleagues also found that about five cases a year caused the shares of publicly traded companies to move "in direct response to a Supreme Court decision," with an average impact of $1.88 billion each. This suggests that Supreme Court decisions can have a significant influence on the broader market, affecting the performance of multiple stocks and sectors.
The Supreme Court's decision in the Myriad Genetics case could have broader implications for the energy sector and the broader market under a Trump 2.0 presidency. The decision could impact the regulatory environment and future growth prospects of the energy sector, as well as the market's perception of Trump's ability to deliver on his energy policy promises. This could lead to changes in investor sentiment and capital flows into energy stocks, ultimately affecting their valuation and performance.
In conclusion, a recent Supreme Court decision in the Myriad Genetics case could potentially undermine the stock market's biggest bull case for a Trump 2.0 presidency. The decision highlights the significant influence that Supreme Court rulings can have on individual stocks and the broader market, with the potential to impact the energy sector and the broader market under a Trump 2.0 presidency. Investors should be aware of the potential risks posed by Supreme Court decisions and consider their impact on their investment strategies.
