From Yahoo Finance: 2025-05-23 13:20:00

Investors are concerned about the impact of the U.S. debt mountain increasing due to a tax and spending bill in the Senate. Moody’s downgrade of the U.S. sovereign credit rating has heightened sensitivity, with long-dated bonds affected. The bill could add $3.8 trillion to the $36.2 trillion federal debt over a decade.

The Senate is expected to make changes to the House bill, potentially increasing spending and deficit growth. President Trump aims to have the bill on his desk by July 4, but delays could make spending cuts less popular. Investors are weighing the potential growth from tax cuts and tariff revenues in their decisions.

Specific winners from the tax bill include companies with high U.S. revenue and capital expenditure, with sectors like industrials, communications services, and energy expected to benefit. Tariffs may generate $2 trillion in revenue over 10 years, but ongoing trade talks could impact this figure. The tax cuts aim to stimulate demand, but must balance increased debt funding costs.

Some investors are disappointed in the current House bill, expecting more significant spending cuts. The potential for larger budget deficits in the U.S. economy worries global bond markets. Bond investors are still attracted to longer bonds for higher yields, with some seeing the steeper yield curve as an attractive long-term investment.

Lawmakers will be influenced by the impact of the House bill and Senate debate on financial markets. Market movements affecting lending rates for consumers may shape the final bill’s version. U.S. senators will be watching Wall Street signals closely, recognizing the potential implications for the economy.

Read more: Analysis-Investors see worsening US deficit outlook as tax bill heads to Senate