Markets are familiar with Donald Trump’s style: U.S. President likes to use colorful words when talking about his decisions and plans.
In case of the Big Beautiful Bill, he has a serious reason to do so: the legislation brings significant changes for the U.S. and for the markets.
The key point of Trump’s Bill is to cut taxes, which he views as a roadblock on the way to higher growth rates. To finance the cut, Trump proposes changes to Medicare, food stamps, and EV subsidies.
According to calculations made by the Congressional Budget Office, the Bill would increase the deficit by $3.3 trillion over the next decade. The significant increase in the budget deficit runs counter to previously stated plans to solve the U.S. national debt problem.
As usual, the deficit will be financed by boosting U.S. debt obligations, which will continue to grow at a robust pace. This fact led to a feud between Trump and Elon Musk, who previously assumed that his role in the White House was to cut spending and rein in the deficit.
What do markets think about recent developments? Clearly, investors do not believe that the U.S. will start solving its debt problem in the near term. Since the start of the year, the U.S. dollar is down by about 10% against a broad basket of currencies. This is a major move for the world’s main reserve currency, which highlights market sentiment. Investors are concerned about further increases in the U.S. debt load.
Combined with never-ending calls to cut interest rates, Trump’s Big Beautiful Bill will lead to an influx of liquidity into the markets in the medium term. At least part of the money received from tax cuts will be used to buy assets.
Obviously, this is a bullish scenario for crypto and traditional financial markets. Not surprisingly, U.S. stock markets are at all-time high levels, while Bitcoin is trading close to the psychologically important $110 000 level. Investors buy assets ahead of the anticipated wave of new purchases, which will be fueled by new legislation.
In the long run, the Big Beautiful Bill will add headache for U.S. debt market investors, who will certainly worry about the sustainability of U.S. debt load. The market will have to absorb additional borrowing from the U.S. government.
The current U.S. administration believes that some of the gap could be filled by additional demand from stablecoins. Donald Trump is expected to sign the stablecoin bill by the end of summer, opening the new era for stablecoins and boosting demand for Treasuries.
While markets are traditionally forward-looking, investors are not trying to figure out what is going to happen in the next ten years. While the additional increase in the budget deficit may lead to serious problems in, say, 2035, the markets will simply ignore it.
Investors are focused on the key thing – additional liquidity. Thus, despite vocal criticism from Elon Musk and Democrats, the Big Beautiful Bill will serve as a bullish catalyst for markets.