Insights 
VT 
Trump’s fiscal monster has ignited the markets. Stocks are surging, the dollar is faltering, and bond markets are on edge. The bill spans virtually every aspect of the U.S. economy, from defense and energy to healthcare and taxation. But embedded within this expansive framework are key amendments poised to influence how traders, corporations, and consumers interact with the U.S. economy in the coming years.
The Price of It All
At the core of the legislation lies a precarious balance between economic stimulus and fiscal expansion. The Congressional Budget Office estimates a $4.5 trillion reduction in tax revenues against $1.1–1.2 trillion in federal spending cuts, creating a $3.4 trillion shortfall to be absorbed into the national debt over the next decade. To mitigate immediate default risk, the debt ceiling has been raised by $5 trillion, an action that provides short-term relief but fuels long-term apprehensions.
Among the final amendments were pivotal regulatory decisions. A proposed ten-year block on state-level AI regulation was overwhelmingly rejected in the Senate. Similarly, Section 899, a retaliatory tax on foreign traders, was eliminated following pushback from financial institutions.
However, incentives still abound. The estate tax exemption rises to $15 million for individuals and $30 million for couples, adjusted for inflation. The SALT deduction increases to $40,000 annually over five years.
Additionally, the 20% qualified business income deduction for pass-through entities becomes permanent in 2026, a significant gain for small businesses reinvesting domestically.
These measures are already impacting market sentiment. The S&P 500 reached new record highs in early July, bolstered by renewed investor confidence in sectors directly benefiting from the bill notably defense, fossil fuels, manufacturing, and small enterprises. A $150 billion injection into military and border infrastructure has driven demand in aerospace and security, while energy companies gain from extended tax breaks and broader access to federal lands.
Winners at the Table, Losers in the Dust
Manufacturers, particularly automakers, benefit from permanent expensing for capital investment and R&D, alongside a reinstated car loan interest deduction. This reinforces Trump’s industrial self-reliance narrative, one that resonates with producers and market participants chasing earnings momentum.
In the short term, some economists forecast a 0.5% GDP growth bump in 2026. Corporate earnings are projected to rise accordingly. Yet underlying risks persist.
Bond yields have risen, reflecting unease over increased Treasury issuance. Higher long-term rates could hamper rate-sensitive industries, including real estate, utilities, and consumer credit. Mortgage rates, in particular, are expected to rise, tightening housing demand and pressuring profit margins.
The real estate sector, once buoyed by pandemic-era stimulus, now faces renewed scrutiny.
Electric vehicle manufacturers face headwinds. The removal of federal EV purchase credits eliminates a crucial consumer incentive. With high production costs and battery supply issues, EV adoption may decline, especially among middle-income buyers.
Healthcare providers also face turbulence. Medicaid reductions and stricter work requirements may shrink coverage for vulnerable groups, tightening reimbursements and increasing administrative burdens. The impact could cascade through hospital margins and insurer forecasts.
Higher education isn’t exempt. New taxes on large university endowments target institutions with high per-student investment returns, potentially curbing funding for infrastructure, scholarships, and research amid declining enrollments.
Dollar on the Defensive
With sector-level implications taking shape, attention shifts to currency markets. The U.S. dollar index continues its downward slide post-bill passage. Overseas investors, especially in Asia and the Middle East, are expressing caution. The rising fiscal deficit and vague debt strategy stoke fears of inflation and capital instability.
BlackRock recently echoed these concerns. A drop in foreign appetite for U.S. debt could strain the dollar. Even if the Fed delays cuts to stabilize outflows, inflationary trends and bond saturation could dent investor trust. Without a robust fiscal strategy, the dollar may struggle over the next 12 to 24 months.
While the bill injects short-term stimulus into targeted sectors, it also sows seeds of long-term fiscal fragility. Surging Treasury yields are testing market tolerance, and the dollar’s trajectory hinges on whether economic performance can offset fiscal drag.
In the near term, equities could extend gains as profits rise due to tax relief and defense-heavy spending. But the longevity of this rally depends on rate normalization, debt market stability, and how well-affected sectors such as renewables and healthcare adapt to new constraints. Traders must watch both earnings reports and Washington’s fiscal dashboard.
Key Movements of the Week
Markets this week are tightly wound. With the focus locked on Washington’s fiscal overhaul and the looming expiration of the U.S. tariff moratorium, traders are hypersensitive to every price movement.
The US Dollar Index (USDX) continues to coil. Key level to watch: 97.25. A stall there signals reversal; a breakout shifts attention to 97.70. Until then, the market remains undecided.
EURUSD is inching up from the 1.1720 region but lacks conviction. A dip toward 1.1700 may offer support. A breakdown below targets 1.1660—a crucial floor.
GBPUSD trades narrowly ahead of the UK GDP release. Should it dip, 1.3520 offers initial support, followed by 1.3415 if that fails.
USDJPY has pulled back from 145.50. If the decline continues, watch 143.85 and 143.60 for bullish setups. These are historically responsive zones.
USDCHF edges lower, with buyers eyeing 0.7915. The upside, if it comes, targets 0.8050 next.
AUDUSD consolidates below recent highs. Watch for reactions near 0.6515, especially ahead of the RBA’s rate decision.
NZDUSD rebounded weakly from 0.6045. If selling resumes, the next supports are at 0.6015 and 0.6000.
USDCAD approaches resistance at 1.3650. A rejection there and a break below 1.35393 could signal deeper retracements.
WTI Crude (USOil) slips. Watch for resistance at 71.80 and 73.40. If those hold, downside targets are 63.35 and 61.00.
Gold nears resistance at 3350. Reversal there targets 3300. Real yields and inflation sentiment are driving gold’s setup.
The S&P 500 remains bullish but cautious. Resistance at 6400 and 6630 is key. A retracement is possible if the tariff moratorium expires without resolution.
Bitcoin fell from 109,650. Support now at 105,700. The market remains nervous, especially with macro risk looming.
Natural Gas (NG) dropped from 3.45. An upside reversal needs to break 3.75. Downside risks aim for 2.869 or 3.09.
Markets are walking a tightrope. With critical technical levels and fiscal decisions converging, discipline and risk management are paramount.
Key Events of the Week
Tuesday, July 8: RBA cash rate decision. Expectations suggest a cut to 3.60% from 3.85%. A bearish AUD tone is expected unless a hawkish surprise emerges.
Wednesday, July 9: RBNZ rate decision, expected to hold at 3.25%. Price structure over speculation. Tariff moratorium expires, a potential flashpoint for USDX.
Friday: UK GDP print. The forecast remains soft after -0.3% prior. GBPUSD volatility is likely. Structural levels may be tested.
