Wall Street surged on Trump’s tax & Fed’s rate cuts optimism
·
Overall impact of Trump’s One Big Beautiful Bill
Act, passed by the Senate and potential tariff hike is negative for Main Street
and Wall Street
·
Trump’s tariffs ($1500-3000) may outnumber the potential
tax cuts benefit ($500-1000) per family/year
·
Gold surged on hopes of an early Fed rate cut after
terrible ADP Private payroll data
·
Trump’s BBB may cause higher deficit and higher
bond yields despite potential Fed rate cuts from September’25
As highly expected, after an intense political soap
opera over the weekend, stretching into Monday, July 1, 2025; Trump’s ‘Big
& Beautiful Bill’ (BBB) narrowly passed in the U.S. Senate with significant
modification. The "One Big Beautiful Bill Act" (OBBA) passed the U.S.
Senate on July 1, 2025, with a 51-50 vote, requiring Vice President Vance to
cast the tie-breaking vote. This legislation, a centerpiece of President
Trump's second-term agenda, extends the 2017 Tax Cuts and Jobs Act, making most
of its tax cuts permanent, while increasing spending for border security,
defense, and energy production.
Trump’s BBB also includes provisions like no taxes
on tips, social security money, overtime pay, or car loan interest for
U.S.-made vehicles, and raises the state and local tax (SALT) deduction cap to
$40,000 until 2030. However, it imposes cuts to Medicaid and SNAP (food stamps),
with the non-partisan Congressional Budget Office (CBO) estimating an
additional $3.3 trillion to federal deficits over the next decade and potential
loss of health coverage for millions.
The BBB bill faced opposition from some Republicans
over deficit concerns and Medicaid cuts, and from Democrats who criticized it
as a tax scam favoring the wealthy. The Senate approved the BBB now returns to
the House for approval of Senate changes, with a tight vote expected due to GOP
divisions. The House vote may happen by Tuesday, July 3, 2025, and Trump is
expected to sign the BBB by July 4, 2025.
The US
Senate modified Trump’s BBB to some extent: The final version of the One Big Beautiful Bill Act (OBBBA), as modified
by the Senate and passed on July 1, 2025, includes several key provisions, but
it still requires House approval to become law. Further changes could occur in
the House or through additional negotiations. Since the House must approve the
Senate's version or reconcile differences, the final version may still evolve,
but the Senate's amendments provide the most current framework.
Key
Provisions of the Senate-Modified OBBBA
The Senate's version, passed with a 51-50 vote
(Vice President Vance casting the tie-breaking vote), incorporates the
following major elements, reflecting changes from the House-passed bill:
Tax
Provisions:
·
Permanent Extension of 2017 Tax Cuts and Jobs Act: The Senate bill makes most of the 2017 tax cuts
permanent, including individual tax rates, the doubled standard deduction
($16,000 for individuals, $32,000 for married couples filing jointly), and
modified alternative minimum tax thresholds. This aims to prevent tax increases
set to occur after the 2017 law's expiration at the end of 2025.
·
State and Local Tax (SALT) Deduction: The SALT deduction cap is increased from $10,000
to $40,000 through 2030, after which it reverts to $10,000. This was a
compromise to address concerns from Republicans in high-tax states, though some
House Republicans (e.g., Rep. Mike Lawler) have called the $10,000 cap
post-2030 a non-starter, suggesting potential House pushback.
·
No Tax on Tips and Overtime: A deduction of up to $25,000 for qualified tip
income is included, but only for taxpayers with incomes below $150,000 (or
$300,000 for joint filers). Overtime pay and interest on car loans for
U.S.-made vehicles are also exempt from taxation, aimed at benefiting workers
and domestic manufacturing.
·
Child Tax Credit: The credit is set at $2,200 per child (down from $2,500 in the House
version) to offset costs while maintaining family tax relief.
·
Senior Tax Deduction: The deduction for taxpayers over 65 is increased
from $4,000 to $6,000, with a 6% reduction for modified adjusted gross income
exceeding $75,000 ($150,000 for joint returns).
No Fresh
Corporate Tax Cuts
The One Big Beautiful Bill Act (OBBBA), as passed
by the Senate on July 1, 2025, does not introduce fresh corporate tax cuts
beyond extending and modifying existing provisions from the 2017 Tax Cuts and
Jobs Act (TCJA). Instead, it focuses on making the most of the TCJA’s corporate
tax provisions permanent and adding targeted business incentives.
Corporate
Tax Provisions in the Senate Version of the OBBBA
Extension
of 2017 TCJA Corporate Tax Rates:
·
The TCJA reduced
the corporate tax rate from 35% to 21%, and the OBBBA makes this rate
permanent, preventing its expiration at the end of 2025. This is not a new cut
but a continuation of the existing rate.
·
The permanence
of the 21% rate is supported by groups like the Business Roundtable and the
American Bankers Association, who argues it provides stability for investment
and lending.
Business
Tax Deductions and Incentives:
·
Section 199A Qualified Business Income Deduction: The bill increases this deduction for pass-through
entities from 20% to 23% and makes it permanent. This benefits small and
medium-sized businesses (MSMEs), including many in financial services and
manufacturing, but is an enhancement of an existing provision rather than a
fresh cut.
·
100% Bonus Depreciation: The OBBBA permanently reinstates full expensing
for capital investments, allowing businesses to immediately deduct the cost of
equipment and machinery. This was part of the TCJA but phased out; its
restoration supports sectors like manufacturing and energy.
·
R&D Expensing: The bill makes immediate expensing of research and
development (R&D) costs permanent, a TCJA provision that had been set to
expire. This benefits tech, pharmaceutical, and industrial firms.
·
Business Interest Deduction: The 30% cap on interest deductions tied to EBITDA
is made permanent, supporting leveraged firms but not reducing taxes beyond the
TCJA framework.
Other
Business-Friendly Provisions:
·
The bill
includes a deduction for interest on car loans for U.S.-made vehicles,
indirectly supporting domestic manufacturing businesses.
·
The estate and
gift tax exemption is doubled, protecting family-owned businesses from higher
taxes upon transfer, which benefits closely held corporations (Family
Office/Business like Trump’s)
Overall
Business and Investment Incentives: Fresh Benefit for MSMEs to some extent
Permanent reinstatement of 100% bonus depreciation,
30% business interest cap tied to EBITDA, and R&D expensing to encourage
business investment. The Section 199A qualified business income deduction is
increased to 23% and made permanent, benefiting small businesses, particularly
wholesaler-distributors. It doubled estate and gift tax exemptions to protect
family-owned businesses and farms.
Spending
and Program Cuts:
·
Medicaid Cuts: The Senate version imposes over $1 trillion in cuts to Medicaid over
the next decade (compared to $700–$880 billion in the House version).
·
Work Requirements: Adults aged 19–64, including those with dependent
children over 14, must work or volunteer at least 80 hours per month starting
December 2026, with exemptions for those with medical conditions or younger
children.
·
Provider Tax Reduction: Gradually lowers the maximum provider tax (used by
states to fund Medicaid) from 6% to 3.5% by 2032, delayed by one year from the
initial Senate proposal to address concerns from rural hospitals.
·
Rural Hospital Fund: Allocates $50 billion to stabilize rural
hospitals, doubled from the House’s $25 billion, to mitigate the impact of
Medicaid cuts.
·
The
Congressional Budget Office (CBO) estimates these changes could result in
7.6–12 million Americans losing health coverage.
·
Supplemental Nutrition Assistance Program (SNAP): Introduces stricter eligibility requirements,
contributing to combined Medicaid and SNAP cuts of up to $1 trillion over a
decade.
·
Thrifty Food Plan: Prohibits the USDA from increasing SNAP’s Thrifty
Food Plan costs based on reevaluations, limiting benefit adjustments
Energy and
Environmental Provisions:
·
Clean Energy Tax Credit Reductions: Scales back Inflation Reduction Act (IRA) tax
credits for clean energy by about $500 billion over a decade, roughly half
their original cost. The Senate version delays phase-outs for solar and wind
credits (partial credits for projects starting in 2026–2027) and extends
credits for nuclear, geothermal, and hydropower longer than the House version.
·
Electric Vehicle (EV) Credits: Eliminates the $7,500 credit for new EVs and
$4,000 for used EVs after September 30, 2025. Home energy efficiency credits
(e.g., for solar panels, heat pumps) end after December 31, 2025.
·
Energy Production: Increases spending for oil and gas leasing,
reinstates canceled Coastal Plain leases in Alaska, and reverses the EPA’s
methane emissions fee.
·
Environmental Rules: Nullifies EPA’s Multi-Pollutant Emissions
Standards for vehicles (model years 2027+) and NHTSA’s Corporate Average Fuel
Economy (CAFE) Standards for 2024–2026.
Border
Security and Immigration:
·
Funding:
Allocates $175 billion for immigration enforcement and border security,
including funding to complete the border wall and provide resources for Border
Patrol and ICE.
·
Asylum Fee: Imposes
a $100 minimum fee for asylum applications, reduced from the House’s $1,000 fee
after the Senate parliamentarian ruled the higher fee non-compliant with
reconciliation rules.
·
Removed Provisions: The Senate parliamentarian struck provisions
banning Medicaid coverage for undocumented immigrants and gender transition
services, as they violated the Byrd Rule.
Other
Provisions:
·
Rural Hospital Stabilization: As noted, a $50 billion fund to support rural
hospitals.
·
Spectrum Reallocation: Directs the NTIA to identify 600 MHz of spectrum
for nonfederal use, with FCC auctions for mobile and fixed broadband within
three to six years.
·
Education and Student Loans: Limits regulatory authority over income-based
repayment plans under the Higher Education Act, allowing interim rules for
specific repayment plans within 270–540 days of enactment.
·
Judicial Review and Agency Oversight: A provision limiting courts’ ability to hold
government officials in contempt was modified to address concerns about undermining
judicial authority, requiring plaintiffs to post bonds matching
government-claimed losses. Another provision banning state AI regulation
survived the Byrd Rule but faces opposition.
·
Agriculture Programs: Extends programs like Price Loss Coverage,
Agricultural Risk Coverage, and Dairy Margin Coverage through 2031, with
modifications, and includes a Poultry Insurance Pilot Program.
·
Aviation and Infrastructure: Invests $12.5 billion in modernizing FAA air traffic
systems and supports American energy dominance in aviation fuel production.
Deficit and
Economic Impact:
·
CBO Estimates: The Senate bill is projected to add $3.3 trillion to federal deficits
over the next decade, including interest, though some estimates suggest up to
$4 trillion or more. This is higher than the House version’s $3 trillion due to
a larger debt ceiling increase ($5 trillion vs. $4 trillion) and less
aggressive spending cuts in some areas.
·
Economic Concerns: Critics, including some Republicans (e.g., Sens.
Rand Paul, Thom Tillis, and Susan Collins) and Elon Musk, argue the bill’s
deficit increase is unsustainable. The CBO and public health researchers warn
of 51,000 preventable deaths annually due to Medicaid cuts and 830,000 job
losses from reduced clean energy incentives.
House
Considerations and Potential Changes: The
Senate’s version must return to the House for approval, where it faces
challenges due to GOP divisions:
·
SALT Deduction: House Republicans from high-tax states (e.g., New York’s Mike Lawler)
oppose the reversion to a $10,000 SALT cap post-2030, calling it “DEAD ON
ARRIVAL.
·
Deficit Concerns: The House Freedom Caucus and fiscal hawks like Rep. Chip Roy criticize
the Senate’s $651 billion deficit increase (excluding interest) over the House
version, demanding deeper spending cuts.
·
Clean Energy and Medicaid: Some House Republicans, like Rep. Chip Roy, argue
the Senate’s weaker rollback of green energy credits (less than 50% reduction)
and softened SNAP reforms are insufficient.
·
Byrd Rule Removals: The removal of provisions like the SHUSH and SHORT
Acts and Medicaid restrictions for undocumented immigrants has drawn criticism
from some House Republicans.
·
Vote Margin:
The House passed its version 215–214–1, indicating a single vote could derail
the Senate’s version. House Speaker Mike Johnson aims for passage by July 4,
2025, but negotiations may delay this.
Likely
Final Version: Assuming the
House approves the Senate’s version with minimal changes (due to the tight
timeline and political pressure from President Trump), the final bill is likely
to closely resemble the Senate’s modifications, with possible minor tweaks:
·
SALT Dedication: The House may push to extend the $40,000 SALT cap beyond 2030 or make
it permanent to secure blue-state Republican votes.
·
Medicaid and SNAP Cuts: The House Freedom Caucus may demand deeper cuts or
reinstating provisions struck by the Senate parliamentarian, though
reconciliation rules limit such additions.
·
Green Energy Credits: The House may seek a faster phase-out of solar and
wind credits to align with conservative priorities, though Senate moderates
(e.g., Sens. Capito, Murkowski) support longer phase-outs.
·
Debt Ceiling and Deficit: To appease fiscal hawks, the House could negotiate
a lower debt ceiling increase or additional discretionary savings, though this
risks alienating moderates.
If the
House makes significant changes, a conference committee may reconcile
differences, potentially delaying passage beyond July 4. Alternatively, the House could pass the Senate’s
version as-is to meet Trump’s deadline, given his public pressure.
The Good,
the Bad, and the Ugly in the One, Big, Beautiful Bill
The Senate-modified OBBBA prioritizes permanent tax
cuts, increased border and defense spending, and significant Medicaid and SNAP
reductions, while scaling back clean energy incentives. Its potential $3.3–4
trillion deficit impact and medical & food aid coverage losses for millions
remain contentious. The House’s response will determine the final version, but
the Senate’s framework is the current baseline. A handful of hard-line House
conservatives are threatening to tank a Wednesday procedural vote for the
party’s reconciliation bill, a revolt that would bring the lower chamber to a
screeching halt and potentially derail GOP leadership’s plan of clearing the
legislation by July 4.
Trump's
Truths:
·
Nobody wants to talk about GROWTH, which will be
the primary reason that the Big, Beautiful Bill will be one of the most
successful pieces of legislation ever passed. THIS GROWTH has already begun at
levels never seen before. Trillions of Dollars are now being invested in the
USA, more than ever before. Likewise, hundreds of Billions of Dollars in
Tariffs are filling up the coffers of the Treasury. The Tariff money has
already arrived and is setting new records! We are growing our way out of the
Sleepy Joe Biden MESS that he and the Democrats left us, and it is happening
much faster than anyone thought possible.
·
Our Country will make a fortune this year, more
than any of our competitors, but only if the Big, Beautiful Bill is PASSED! As
they say, Trump’s been right about everything, and this is the easiest of them
all to predict. Republicans, don’t let the Radical Left Democrats push you
around. We’ve got all the cards, and we are going to use them. Last year
America was a “DEAD” Nation, with no hope for the future, and now it’s the
“HOTTEST NATION IN THE WORLD!” MAKE AMERICA GREAT AGAIN!
·
Almost all of our Great Republicans in the United
States Senate have passed our “ONE, BIG, BEAUTIFUL BILL.” It is no longer a
“House Bill” or a “Senate Bill”. It is everyone’s Bill. There is so much to be
proud of, and EVERYONE got a major Policy WIN — But, the Biggest Winner of them
all will be the American People, who will have Permanently Lower Taxes, Higher
Wages and Take Home Pay, Secure Borders, and a Stronger and More Powerful
Military. Additionally, Medicaid, Medicare, and Social Security Benefits are
not being cut, but are being STRENGTHENED and PROTECTED from the Radical and
Destructive Democrats by eliminating Waste, Fraud, and Abuse from those
Programs.
·
We can have all of this right now, but only if the
House GOP UNITES, ignores its occasional “GRANDSTANDERS” (You know who you
are!), and does the right thing, which is sending this Bill to my desk. We are
on schedule — Let’s keep it going and be done before you and your family go on
a July 4th vacation. The American People need and deserve it. They sent us here
to GET IT DONE!
·
Our Country is going to explode with Massive
Growth, even more than it already has since I was re-elected. Between the
Growth, this Bill, our Tariffs, and more, “THE ONE, BIG, BEAUTIFUL BILL” sets
the United States down a fiscal path by greatly reducing our Federal Deficit,
and setting us on course for enormous Prosperity in the new and wonderful
Golden Age of America. To my GOP friends in the House: Stay UNITED, have fun,
and Vote “YAY.” GOD BLESS YOU ALL!
·
Republicans, the One Big Beautiful Bill, perhaps
the greatest and most important of its kind in history, gives the largest Tax
Cuts and Border Security ever, Jobs by the Millions, Military/Vets increases,
and so much more. The failure to pass means a whopping 68% Tax increase, the
largest in history!!!
Strong
Support: Trump has consistently
championed the OBBBA, describing it as “arguably the most significant piece of
Legislation that will ever be signed in the History of our Country” and a “big,
beautiful bill” that embodies his second-term agenda. He emphasizes his tax
cuts, border security funding, and military spending as fulfilling campaign
promises. Trump has dismissed opposition, particularly from Elon Musk,
asserting that the bill’s benefits outweigh concerns about its $3.3–$4 trillion
deficit impact. He told NBC News he’s “very confident” it will pass, claiming
Musk’s criticism has highlighted the bill’s strengths by drawing attention to
it.
Feud with
Musk: Trump’s relationship with
Musk soured over the bill, with Trump suggesting Musk’s opposition stems from
personal interests, such as the bill’s elimination of electric vehicle (EV) tax
credits affecting Tesla. He threatened to have the Department of Government
Efficiency (DOGE) review Musk’s federal subsidies, stating on Truth Social that
without them, Musk “would probably have to close up shop and head back home to
South Africa. Elon Musk Calls the bill an
“abomination,” warning of $4–$5.8 trillion in added debt and job losses from
clean energy cuts. His opposition, rooted in fiscal concerns and Tesla’s
interests, has fueled market uncertainty, particularly in renewables.
Trump’s
Truths:
·
Elon Musk knew, long before he so strongly endorsed
me for President, that I was strongly against the EV Mandate. It is ridiculous,
and was always a major part of my campaign. Electric cars are fine, but not
everyone should be forced to own one. Elon may get more subsidies than any
human being in history, by far, and without subsidies, Elon would probably have
to close up shop and head back home to South Africa. No more Rocket launches,
Satellites, or Electric Car Production, and our Country would save a FORTUNE.
Perhaps we should have DOGE take a good, hard look at this? BIG MONEY TO BE
SAVED!!!
President Trump hailed the bill as a historic
achievement, arguing it supports economic growth through tax cuts and energy
dominance, dismissing deficit concerns as a “hoax” and claiming it will drive
investment. He criticizes Musk’s opposition as self-interested, particularly
over EV credit cuts. The Business Roundtable and Retail Industry Leaders
Association praise the bill’s corporate tax stability, while the American
Bankers Association supports its pro-growth provisions. Democrats: Leaders like
Chuck Schumer and Bernie Sanders criticize the bill as a “giveaway to the
rich,” citing wealth transfers and coverage losses, which could depress
consumer-driven sectors.
Trump’s
BBB/OBBBA fate in the House is still uncertain.
Sources suggest Musk’s opposition partly stems from
the bill’s elimination of EV and clean energy tax credits, which impact Tesla,
and the rejection of his ally Jared Isaacman for NASA administrator, affecting
SpaceX. He also lobbied unsuccessfully for Starlink integration into FAA
systems. Musk, joined by Sens. Paul, Lee, Johnson, and some House conservatives
like Roy and Greene, opposes the bill’s fiscal impact and specific provisions
(e.g., EV credit cuts, AI regulation bans). Musk’s influence and his past GOP
financial support embolden fiscal conservatives but alienate moderates and
Trump loyalists.
Democrats, unified in opposition, Democrats like
Schumer and Sanders criticize the bill’s social program cuts and tax breaks for
the wealthy, finding rare alignment with Musk’s deficit concerns, though some,
like Sen. Chris Murphy, question Musk’s sincerity and double standards
(hypocrite). Trump, backed by Thune, Johnson, and most Republicans, views the
OBBBA as a critical achievement, emphasizing tax cuts and border security while
downplaying deficit concerns. They dismiss Musk’s attacks as misguided or
self-interested, with Trump leveraging personal insults to pressure compliance.
The public feud between Trump and Musk, escalating from policy disagreement to
personal attacks, highlights GOP fractures between fiscal hawks, moderates, and
Trump loyalists. The bill’s passage remains precarious, with the House vote on
Senate changes uncertain due to narrow margins and ongoing dissent.
The Senate’s version, with its $5 trillion debt
ceiling increase, $1 trillion in Medicaid/SNAP cuts, and reduced clean energy
incentives, has intensified debates. Musk’s vocal opposition, rooted in his
DOGE legacy and business interests, contrasts with Trump’s insistence on swift
passage. The House’s upcoming vote will be pivotal, with potential for further
amendments or rejection if GOP dissent grows.
Market
Impact
Wall Street
closed mixed on Tuesday, July 1,
amid mixed effects of Trump’s BBB impact, personal & corporate tax cuts
(partial/indirect), Medicaid hikes, and potential tariff hikes. The S&P 500
lost 0.1%, and the Nasdaq-100 fell 0.8% following Monday’s record highs. The
Dow Jones (DJ-30) outperformed, gaining 400 points, boosted by sharp advances
in healthcare stocks like UnitedHealth and Amgen. Healthcare stocks surged on
Medicaid cuts (over $1T), boosting private healthcare service providers and
medical insurance providers like UnitedHealth.
In contrast, tech stocks dragged on the Nasdaq-100,
with Tesla plunging after Trump escalated his feud with Musk by threatening to
pull all federal subsidies, investigate DOGE and deport him to South Africa.
Fed Chair Powell reiterated his cautious tone on rate cuts, highlighting
tariff-related inflation risks and stressing the need for tariff rate clarity.
Powell again stressed that has there were no Trump tariff issues, the Fed would
have cut rates from February’25 itself. Meanwhile, May JOLTS job openings came
in stronger than expected, reinforcing the Fed’s wait & watch stance. The
market is now assuming Fed rate cuts from September’25.
On Wednesday, July 2, 2025, Wall Street reversed to
some extent as the S&P 500 and Nasdaq-100 recovered, rising 0.5% and 0.8%,
respectively, with the S&P 500 closing at a new record high while the Dow
ended flat. Markets were lifted by strong tech gains and news of a US-Vietnam
trade agreement that includes 20% tariffs on certain Vietnamese imports. Gold
surged, while USD skidded on hopes of an early Fed rate cut after a terrible US
ADP private payroll report.
On Wednesday, Wall Street was boosted by energy,
materials, techs, consumer discretionary, real estate, industrials, and
communication services, while dragged by healthcare, utilities, financials, and
consumer staples. Tesla recovered on the de-escalation of war of words between
Trump and Musk after Musk appreciated Trump’s reported Gaza war ceasefire. Musk
may also resign from taking active roles in Tesla and other businesses, paving
the way for 3rd political alternative in the US. Dow-30 was boosted
by Nike, NVIDIA, Apple, Caterpillar, Chevron, Goldman Sachs, Boeing, American
Express and Merck, while dragged by United Health, Travelers, IBM, Coca-Cola,
Salesforce, McDonald’s, Cisco, Walmart and Walt Disney.
Technical
outlook: DJ-30, NQ-100, and Gold
Looking
ahead, whatever may be the narrative, technically Dow Future (CMP: 44800) now has to sustain over 45000 for a
further rally towards 45300/45800* and only sustaining above 45800, may further
rally to 46100/46500-47100/47200 in the coming days; otherwise sustaining below
44950, DJ-30 may again fall to 44200/43900-43400/42400 and 41700/41200-40700/39900
in the coming days.
Similarly,
NQ-100 Future (23000) now has
to sustain over 23100 for a further rally to 23200/23600-23800/24000 and 24100/24450-24700/25000
in the coming days; otherwise, sustaining below 22900, NQ-100 may again fall to
2400/22200-21900/20900-20700/20200 and 19890/18300-17400/16400in the coming
days.
Technically
Gold (CMP: 3350) has to sustain over 3375-3395 for a
further rally to 3405/3425*-3450/3505*, and even 3525/3555 in the coming days;
otherwise sustaining below 3365-3360, Gold may again fall to 3340/3320-3300*/3280
and 3255/3225-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900*
and 2800/2750 in the coming days.
