US President Trump signed the “Big and Beautiful” tax and spending bill into law on Independence Day. Analysts generally believe that the bill reduces taxes, which is theoretically beneficial to corporate capital expenditures (Capex) and consumption, but has limited impact on overall economic growth and significantly increases long-term debt.
DBS Group held a media briefing on the third quarter investment outlook “The Global Pivot” on Monday (July 7). Group strategist Zheng Dilun said at the meeting that for now, the market impact of the above bill is roughly neutral because it is more of a long-term problem.
The $3.4 trillion (S$4.33 trillion) budget bill includes extending Trump’s first-term tax cuts, increasing military spending and allocating funds to combat illegal immigration, and also covers a series of priorities he proposed during his 2024 campaign.
David Kohl, chief economist at Julius Baer, said in a briefing on Monday that the bill ensures that some major temporary tax provisions are permanently extended, thus avoiding a possible “fiscal cliff.”
Cole believes that the bill has little substantial support for economic growth. The continued high deficits in the next few years will make US fiscal policy unsustainable, and also mean that interest expenses will continue to rise, which will put downward pressure on the long-term prospects of the US dollar. In order to ease debt pressure, the United States may be willing to tolerate higher inflation rates.
The first trading day after the bill was passed opened down
Private bank Lombard Odier issued a report pointing out that it is difficult to see the “beauty” of the “big and beautiful” bill in the context of almost no macroeconomic benefits and further deterioration of fiscal prospects.