Market Commentary: Impact of Trump’s Big Beautiful Bill on the Bond Market and Dollar
Trump’s ‘Big Beautiful Bill’: U.S. Bond Yields Surge and the Dollar Slips
- Extended Tax Cuts: Permanent extension of the 2017 Tax Cuts and Jobs Act (TCJA) provisions, preventing individual and corporate tax rates from rising in 2026. This covers income tax cuts and business incentives that were set to expire, resulting in no significant tax increases next year. The bill also modifies some tax rules, such as enhancing the deduction for pass-through business income and other credits and raising the state and local tax (SALT) deduction cap from $10,000 to $40,000.
- Border Wall & Immigration Funding: Financing for border wall construction and enforcement on illegal immigration. The bill funds tens of thousands of new Border Patrol agents and increases deportation capacity, aiming to remove up to 1 million people annually
- Defense Spending: A substantial increase in defense expenditures, highlighted by funding for a “Golden Dome” missile defense system. This expensive initiative, along with higher overall military outlays, reflects Trump’s focus on bolstering U.S. defense capabilities. These defense increases are expenditures without immediate offsets, contributing to some of the deficit concerns we will address later in this commentary.
- Entitlement & Spending Reforms: The package introduces cost-saving measures to entitlement programs. It tightens eligibility for social safety net programs like Medicaid, SNAP, and Affordable Care Act subsidies. In effect, certain benefits would be curtailed or have stricter work requirements. These cuts were intended to partially offset the tax cuts, but even lawmakers note the reductions “don’t come close” to paying for the bill’s expensive provisions. Despite some spending reductions and additional savings like repealing unused COVID funds, the net result is expected to be larger fiscal deficits.
- Continuing Resolution to Prevent a Shutdown: Procedurally, the bill leverages a continuing resolution to fund government operations through September 30, 2025. By combining appropriations into this legislation, Congress avoids a near-term government shutdown. Essentially, this year’s federal funding is locked in. This maneuver ensures the government stays open, but it also sidesteps the normal budget process, a sign of how urgent and sweeping the legislation is.
The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. This article was written by Dennis P. Barba, Jr. CEO, Managing Partner, Michael P. Finkelstein, CFA, Partner, and Robert Frenkel, CFP®, of Oxford Harriman & Company. Additional information is available upon request.
PM-11272026-8005741.1.1