Trump’s “One Big Beautiful Bill” has become a reality and with it comes a questionable outlook for risk assets. The bill, while very likely to accelerate the accumulation of debt by the U.S. government, could also act as a form of QE for the economy. The Tax Cuts & Jobs Act from Trump’s first term indirectly resulted in a big rally for stocks in the year following its passage. The reduction in the corporate tax rate ignited a big earnings boost for companies that fueled the run. There may not be quite as big of a catalyst this time around, but I wouldn’t be surprised if the S&P 500 set a series of new highs in the near future.
While the Fed hasn’t ruled out a July rate cut, it seems increasingly unlikely that they’ll pull the trigger this month. Given its history of slow action and its insistence that it’s data dependent, September is clearly the target at this point, but the pace of cuts could pick up as the data comes in. The ADP employment report showing a decline in private jobs created is troubling considering that the soft data up to this point has been suggesting the same. Real wage growth and real GDP are also slowing, which means that the Fed may end up spending the 4th quarter of this year and the first half of next year playing catch up again if these trends continue.
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