4 July 2025
Jose Rasco
Chief Investment Officer, Americas, HSBC Private Bank and Premier Wealth
Michael Zervos
Investment Strategy Analyst, HSBC Private Bank and Premier Wealth
The One Big Beautiful Bill Act is a sweeping budget reconciliation package encompassing tax cuts, border security funding, spending reductions, and various policy changes. It was narrowly approved by the Senate on 1 July 2025, in a 51-50 vote (with Vice President J.D. Vance casting the tie-breaker). The House of Representatives concurred on 3 July 2025, by a 218-214 vote to adopt the Senate’s amended version. The legislation now is on its way to President Trump’s desk and is expected to be signed on 4th of July.
Below is a comprehensive overview of the bill’s key provisions:
On the flip side, the bill tightens work requirements for Medicaid and Supplemental Nutrition Assistance Program (SNAP), which could mean millions can lose access to health or food benefits in the years ahead. The law also raises the federal debt ceiling by USD5 trillion, adding to long-term debt concerns.
For fixed income investors, given higher than anticipated deficits, long-term yields could rebound, pressuring bond prices and elevating borrowing costs. If demand falters, we can expect higher rates, which could impact mortgage, corporate, and consumer loans, potentially cooling broader markets. This pressure is offset by rising expectations of Fed rate cuts and inflation for now being more benign than investors feared. As a result of the tug-of-war between those factors, fixed income volatility may continue. That said, the real yield and the term premium remain relatively elevated, so there is value in high quality fixed income.
While any rise in yields may temporarily buoy the dollar, growing deficits and twin deficits (fiscal + current account) could be potential headwinds, but most of the USD weakness is probably priced in. The removal of section 899 from the bill will also ease some investors’ reservations to hold USD assets.
For US equity investors, there’s near-term support for Technology, Defense, Industrials and Energy, thanks to tax relief and boosted spending. Rollbacks on green energy credits dampen the investment outlook for renewables. Cyclical and value stocks could benefit, as well as the secular themes of the technology revolution, the re-industrialisation of the US, and the near/onshoring of jobs in the US.
The Big Beautiful Bill delivers near-term boosts, especially in cyclical sectors and some more investment certainty for corporates (trade uncertainty remains an obstacle). However, the bill also potentially magnifies long-term fiscal and inflation pressures, stickier long-term yields, and a weaker dollar.
We maintain our overweight US equity positioning. This is mostly because earnings remain strong even as economic growth slows somewhat. However, the US government’s policy shifts remain a source of volatility as trade negotiations are ongoing. Tariffs are the first leg of President Trump's "three-legged" policy agenda. The second leg, which has now been concluded, includes extending the debt ceiling, cutting personal and corporate taxes, and providing fiscal stimulus. The third leg focuses on deregulation, targeting the Financial, Healthcare, Technology and Energy sectors, which could be another positive for stocks.
Regardless, implementation risks remain, so we continue to focus on building resilient portfolios through diversification and a focus on quality assets.
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