Weekly Buzz: Big beautiful borrowing: Trump's $2.4 trillion bill 💰

5 minute read

President Trump's 'One Big Beautiful Bill Act' is racing through Washington, promising to extend tax cuts while adding massive new government spending. Wall Street hasn’t decided if it's brilliant or reckless.

What’s the big, beautiful impact?

If the bill is signed, US companies are looking at big tax breaks. It makes permanent the tax cuts set to expire in 2026, adds corporate benefits like immediate write-offs of equipment purchases, and includes US$150 billion in defense spending. The Tax Foundation projects an added 1.1% GDP growth from these measures, driven by business investment and consumer spending.

That’s good news for investors, but there are also big trade-offs. The Congressional Budget Office projects US$2.4 trillion in additional debt stemming from this bill over the next decade, further adding to America's already elevated debt-to-GDP ratio and budget deficit (more on this in Simply Finance below).

Bond markets are already sounding alarms. US Treasury yields have spiked as investors demand higher compensation for lending to an increasingly indebted government. The US dollar has weakened against major currencies as investors question America's fiscal discipline.

What's the takeaway?

The question isn't whether the US can stimulate growth – government spending reliably boosts economic activity. It's whether the world's largest economy can sustain this level of borrowing without triggering inflation all over again or market backlash as investors lose confidence in fiscal sustainability.

The bond market's early warning signs suggest the kind of uncertainty where diversification proves its worth. Rather than trying to predict whether this fiscal experiment succeeds or fails, long-term investors are likely better served maintaining exposure across different regions, currencies, and asset classes.

💡 Investors’ Corner: How John Bogle proved Wall Street wrong

Back in 1975, John Bogle launched the first index fund, making it possible for everyday investors to ride the market's waves passively and with minimal fees. Wall Street laughed, calling it "Bogle's folly." Today, index funds manage over US$7 trillion globally – turns out the joke was on them.

Every dollar paid in unnecessary fees is a dollar that can't compound for your future. Consider this: a $10,000 investment growing at 10% annually becomes $73,280 after 20 years. But subtract a 2% annual fee, and that same investment grows to just $49,268 – a 39% difference.

Bogle's insight was simple: most investors don't need to beat the market – they need to capture it. Trying to outperform the market is usually a fool's errand – mainly because the market is often a step ahead. His strategy is simple: keep it passive, keep costs low, and let the market do its thing.

When you invest in a diversified portfolio, you're essentially placing a bet on global economic growth rather than trying to predict which companies or sectors will outperform. As Bogle put it: "Don't look for the needle in the haystack. Just buy the haystack."

(For a low-cost, globally diversified portfolio that’s ready to go, check out General Investing.)

This article was written in collaboration with Finimize.

🎓 Simply Finance: Budget deficit

Think of a government budget like your household finances – a budget deficit means the government is spending more money than it's bringing in. Just like you might use a credit card when expenses exceed income, governments typically borrow money through the sale of bonds to cover this shortfall.

🗓️ Save the Date

Stephanie Leung, our Chief Investment Officer, will share her expert analysis on the market moves that defined H1 2025, alongside strategies to capitalise on the bigger trends.

Here’s the agenda:

• The market's biggest moves in the first half of 2025, including gold’s 30% surge and the US dollar’s 10% weakening
• How the summer could bring a tactical rotation across asset classes, with some areas of the market looking crowded
• How you can strategically position yourself as markets recalibrate and reset ahead of bigger structural forces

Don’t miss this chance for a peek into our market research and the strategic thinking behind our investment decisions – insights which can help you identify key opportunities.