The essence of the “Big Beautiful Bill”
On July 4, 2025, President Donald Trump signed
his landmark “One Big Beautiful Bill” into law, a 900-page legislation with the
potential to radically change the course of the U.S. economy. Advancing though
Congress through the budget reconciliation process on a thin party-line vote
(51-50 in the Senate and 218-214 in the House), the bill represents one of the
most bold tax experiments in modern history.
The Trump administration has called it “the
greatest middle-class tax cut in history” and forecasting an imminent “economic
boom”, while critics, including the Congressional Budget Office, are sounding
the alarm,warning of a potential multi-trillion dollar surge in the national
debt and the most significant rollback of social programs in a generation. For
traders and investors, the bill creates a sharp, two-sided market dynamic.
Tax Reform: What Changes for Citizens and Businesses
The core of the bill is a tax reform that
continues and expands the policies started in 2017.
For Citizens and Families
The most important change is that the personal
income tax rates from the 2017 Tax Cuts and Jobs Act of 2017 will now be
permanent. These tax rates were originally supposed to end after 2025.
Additionally, the standard deduction will be permanently doubled, which will
simplify the tax filling process for millions of families.
The law also introduces new but temporary
(until 2028) tax deductions:
●
No
Tax on Tips: Service industry workers will be able to
deduct their tips from their taxable income.
●
No
Tax on Overtime: Income from overtime work will also be
tax-deductible.
●
Car
Loan Deduction: Buyers of American-made cars will be able to
deduct interest on their car loans.
The temporary nature of these popular benefits
makes the law seem less expensive officially, but it creates a “fiscal cliff”
in 2028. It will be politically difficult for a future Congress to let these
deductions expire. The Child Tax Credit is also increased to $2,200 per child.
For Businesses and Investors
The bill aims to encourage investment in the
U.S.:
●
100%
Bonus Amortization: Businesses can immediately and entirely write
off the full cost of new equipment.
●
R&D
Costs Write-off: Costs for research and development in the
U.S. can now be deducted in the year they occur, instead of being spread over
several years.
●
The
End of “Green” Credits: Many tax credits for clean energy, introduced
under the Biden administration, are being eliminated. This signals a change in
government policy to give more support to fossil fuels like oil and gas.
●
SALT
Tax Deduction Limit: The amount of state and local taxes that
people can subtract from their income before paying federal taxes has been
increased. The new limit is now $40,000 up from the previous $10,000. This
change benefits those living in high-tax states, but for families earning over
$500,000 a year, this tax advantage will be slowly reduced.
Reshaping Government Spending
OBBBA fundamentally changes government
spending priorities, moving huge resources to some areas by cutting from
others.
Increased Spending: Border and
Defense
The bill allocates about $350 billion to
strengthen border control and national security. The money will be used for
building a border wall, creating new migrant detention centers, and hiring
thousands of ICE officers to deport up to 1 million people per year. The
defense sector also receives significant funding, including $25 billion for a
new “Golden Dome” missile defense system.
Spending Cuts: The Social Sector
The increased spending is being paid for by
unprecedented cuts in the social sector. The Medicaid program for low-income
individuals will be cut by more than $1 trillion over ten years, the largest
reduction in its history. Strict work requirements (at least 80 hours per
month) are being imposed for millions of Medicaid and food assistance
beneficiaries. Failure to meet these requirements will result in a loss of
benefits. The Congressional Budget Office estimated that about 10.9 million
Americans could lose their health insurance as a result.
Economic Forecasts: Boom or Debt Trap?
Forecasts of the bill’s consequences are
completely opposite. Supporters claim the tax cuts and deregulation will lead
to the creation of up to 7.2 million jobs and economic growth. However,
independent analysts like the Tax Foundation and CBO paint a different picture.
They estimate the bill will increase the budget deficit by $3-6 trillion over
10 years. Analysis shows the reform disproportionately benefits the wealthiest
families, while the poorest risk losing income due to cuts in social benefits.
Fundamental Analysis: OBBBA’s Impact on the S&P 500
The “One Big Beautiful Bill” presents a
dual-edged sword for the S&P 500, offering short-term stimulus against a
backdrop of significant long-term risks.
The Bull Case (Short-Term):
In the short term, the market is positioned
for a rally. The combination of permanent bonus depreciation and immediate
R&D deductions will directly boost corporate profits and earnings per
share. This, combined with a massive fiscal injection from defense and
infrastructure spending, creates a powerful crosswind for GDP growth. The main
beneficiaries in this case will be the defense industry, industrial enterprises
and traditional energy sector.
The Bear Case (Long-Term):
The long-term outlook is clouded by
significant macro risks:
●
Inflation
& The Fed: A massive, unfounded fiscal boost could lead
to a return of price pressures, forcing the Federal Reserve to keep interest
rates high for longer. This would increase corporate borrowing costs and reduce
stock prices.
●
The
Debt Specter: The projected $3-6 trillion increase in the
national debt is the biggest threat. It could trigger a sovereign credit
downgrade and “crowd out” private investment by driving up the cost of capital
across all of the world.
●
Weakening
Consumer Base: Deep cuts to social safety nets will reduce
disposable income for millions of Americans, which could negatively impact
overall consumption, causing consumer-oriented industries to suffer.
Technical Analysis: OBBBA’s Impact on the S&P 500
The S&P 500 Index is manifesting strong
upward momentum, hitting all-time highs and confirming the strength of the
global bullish trend. We believe that the uptrend will continue regardless of
“Big Beautiful Bill”. The technical analysis of the weekly chart indicates a
clear scenario that suggests a corrective pullback before the next significant
upward momentum.
A key confirmation of the buyers’ dominant
strength was the confident breakdown of the previous structural high.
Key Buying Zone: $5800 – $6150
Our analysis highlights a strategically
important support area, which may become a springboard for a new growth wave.
The significance of the $5860 – $6150 range is due to the combination of these
two strong technical factors:
1. Weekly price imbalance
(Fair Value Gap (FVG 1W): The market is anticipated to seek to fill this
“gap” to rebalance.
2. Optimal Fibonacci
Entry Point (OTE): The 0.705 level inside this zone is traditionally considered
one of the most reliable levels to enter a trend-following position after a
correction.
In case of successful testing of the support
zone and resumption of the upward movement, the main target for the S&P 500
index is the level of $6980. This mark matches the Fibonacci level of 1.618,
which historically acts as a technically justified target price level for long
positions.
Conclusion
OBBBA is a direct successor and a radical
expansion of the 2017 tax cuts, making many of its temporary provisions
permanent. Its philosophy is similar to Reagan’s 1981 Economic Recovery Tax
Act, which also focused on supply-side economics and led to a sharp increase in
national debt.
The S&P 500 suggests a continuation of the
bullish rally after a corrective pullback. The strategy is to watch the price
reaction in the support zone of $5800 – $6150. Rebound from the zone of
interest may serve as a signal to open long positions with a target at $6980.
Investors and traders are advised to keep a close eye on these key levels to
make calculated trading decisions.
