Hits Keep Coming
This week marked the passage of a budget bill advocated by President Trump and Republicans, passed through a special process called reconciliation. This process has specific rules and, when followed, allows the Senate to pass legislation with a simple majority.
- The New York Times offers a tool to enter your own information and see how the tax provisions affect you: NYT Tax Calculator.
- The Wall Street Journal also provides details on the impact of the new law: WSJ Tax Coverage.
It’s complicated, and the consensus from all but Republicans and the White House is that over 10 years, it will add between $3 and $4 trillion to the national debt. The bill also adds a work requirement to receive Medicaid benefits, cuts funding for rural hospitals, and significantly reduces the SNAP program, which provides food assistance to low-income Americans.
For investors, the Wall Street Journal discusses concerns over the increased debt and deficit: Wall Street and the Deficit. You can also read our perspective on how rising deficits might influence market behavior in our blog post: Market Uncertainty and FOMO.
Incidentally, polling shows the new budget bill has a 60% disapproval rate.
Markets have reacted to both tariffs and the threat of increased deficits. Interest rates have exceeded 5% on 30-year Treasuries this year. The yield curve currently resembles a “smile” shape. Meanwhile, equity markets continue to reach new highs as uncertainty also hits new highs. For insights into how volatility and uncertainty impact investment strategies, check out our piece on Investing Through Uncertain Times.
Employment numbers published today show a resilient labor market, although most new jobs are in government and healthcare—areas that remain somewhat vulnerable. The dollar continues to weaken. Tariff “D-Day” approaches on July 9, along with the upcoming Federal Reserve meeting later this month. Betting markets still expect a rate decline in September, though it might have come sooner if labor market data were weaker. If you’re curious how Fed actions might influence your financial plan, we discuss it in Fed Policy and Your Portfolio.
Lastly, the Washington Post reported that the reliability of government data is being scrutinized due to layoffs and changes in data-collection processes. Political pressure is evident across many government functions. Read more here: Washington Post Article.
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