'YEAR OF THE DRONE': 2026 is going to be an 'amazing year' for these stocks

Market Outlook & Investment Strategies: A Discussion on Tariffs, Earnings, and Sector Opportunities

Key Concepts:

• IEEPA (International Emergency Economic Powers Act): US law granting the President broad authority to regulate international commerce during national emergencies.
• Net Interest Margin (NIM): The difference between the revenue a bank generates from its lending activities and the interest it pays out to depositors.
• M&A (Mergers & Acquisitions): The consolidation of companies or assets through various types of financial transactions.
• Rare Earth Elements: A set of seventeen chemical elements crucial for various technologies, including AI, defense, and renewable energy.
• Section 122, Section 232, Section 301, Section 338: Specific US trade laws that could be used to implement tariffs if IEEPA authority is limited.
• Fiscal Year '25: Refers to the financial year starting in 2024 and ending in 2025.

I. Supreme Court Tariff Ruling & Market Impact

The discussion centers around an impending Supreme Court ruling, expected at 10:00 AM Eastern, regarding the President’s authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). The ruling has the potential to reshape the President’s trade agenda and impact hundreds of billions of dollars in tariff revenue.

Treasury Secretary Scott Bessent anticipates a “mish mash” ruling, suggesting the administration has alternative tools even if the President’s IEEPA authority is curtailed. Jefferies research indicates a 70-80% probability that the Court will invalidate the emergency-level tariffs, which currently account for 56% of Fiscal Year '25 tariff revenue.

Mike Lee believes much of this potential impact is already priced into the market, and the actual market reaction will depend on the specifics of the ruling and how the administration utilizes alternative authorities like Section 122, Section 232, Section 301, and Section 338. He suggests the Court historically tends to find middle ground, and the administration’s existing revenue stream and potential relief measures may mitigate significant market disruption.

II. Sector-Specific Impacts of Potential Tariff Changes

Jefferies analysts predict that invalidation of the IEEPA tariffs would be directionally positive for risk assets exposed to broad tariffs. They identify potential beneficiaries including Hershey, Smucker, Ralph Lauren, Best Buy, and Target. The report suggests a shift towards narrower, more procedurally constrained tariffs under alternative authorities. Specific sectors expected to see relief include semiconductors, furniture, kitchen cabinets, and food items like coffee, beef, bananas, and cocoa.

While short-term stock price increases are possible, Mike Lee advises against making dramatic investment shifts based solely on this news event.

III. Q4 Earnings Expectations & Investment Opportunities

The conversation shifts to the upcoming fourth-quarter earnings season, with major banks (JP Morgan, Bank of America, Wells Fargo, Citi) reporting next week. Kyle Wool anticipates strong bank profits driven by investment revenue, loan growth, and higher net interest margins.

He highlights a temporary slowdown in IPO and M&A activity due to a previous government shutdown, but predicts a robust 2026, fueled by Artificial Intelligence (AI) and the need for critical rare earth elements. He specifically mentions companies like Unusual Machines, RCAT, and Paladine AI in the drone sector, citing government support for the American drone industry as a catalyst. He also suggests potential mega-IPOs from companies like Andarall.

IV. Commodity Deals & the Energy Transition

The discussion touches upon the potential acquisition of Glencore by Rio Tinto, which would expand Rio Tinto’s copper footprint to meet surging demand from AI. Kyle Wool emphasizes the importance of coal, iron ore, and rare earth elements for building the necessary infrastructure, even amidst the energy transition. He advocates for diversifying sourcing beyond China, collaborating with partners in Kazakhstan and Vietnam, and exploring tungsten plays.

Mike Lee views the increasing deal activity and heating up IPO calendar as signs of a growing and expanding economy, and anticipates renewed investment in fossil fuel energy.

V. Biotechnology Sector Outlook

Mike Lee expresses a positive outlook on the biotechnology sector, citing the need for large pharmaceutical companies to replenish their drug pipelines and the advancements in AI accelerating clinical trials. He attributes this potential growth to a policy of deregulation.

Notable Quotes:

• Mike Lee: “I think Scott Bessent is right. Even if they get overturned it is what does the relief look like…how that affects things going forward is really going to be how the details play out in the ruling.”
• Kyle Wool: “I think 2026 is going to be an amazing year especially for the IPO and M&A market.”
• Kyle Wool: “Everyone’s talking about the price of gold…To build the infrastructure the world needs you need coal, you need iron ore, you need the critical rare earth.”
• Mike Lee: “These deals that we're seeing left and right, the IPO calendar starting to heat up, these are all signs of growing economy and expanding economy.”
• Maria Bartiromo: “I love that it’s the year of the drone. 2026 is actually the year of the horse but I like also talking about the year of the drone.”

Logical Connections:

The discussion flows logically from a near-term market event (Supreme Court ruling) to broader economic trends (earnings season, commodity deals, sector opportunities). The conversation highlights the interconnectedness of these factors and how they influence investment strategies. The discussion on tariffs leads to a discussion of which sectors will be impacted, which then leads to a discussion of overall earnings and investment opportunities.

Data & Statistics:

• 70-80%: Predicted probability of the Supreme Court overturning the emergency-level tariffs.
• 56%: Percentage of Fiscal Year '25 tariff revenue currently accounted for by tariffs potentially invalidated by the ruling.
• 65%: Increase in the price of gold over the past year.
• 100%: Increase in the price of silver over the past year.

Conclusion:

The discussion paints a cautiously optimistic picture of the market. While the Supreme Court ruling on tariffs introduces uncertainty, the prevailing sentiment is that much of the potential impact is already priced in. Strong Q4 earnings, particularly in the banking sector, are anticipated, and emerging opportunities in AI, rare earth elements, the drone industry, and biotechnology are highlighted. The emphasis on diversifying supply chains and investing in critical resources underscores a long-term strategic outlook focused on American economic resilience and growth.