Terry Haines on Tax Bill Passage and Market Impact

Tax Bill Passage Timeline

• 🗓️ It is entirely possible that a tax bill can be passed by July 4th, despite a short legislative week and a federal holiday.
• ⏳ Lawmakers have two full weeks before July 4th, and leadership has indicated willingness to stay longer if necessary.
• 🧩 The fundamental structure of the bill is largely intact, with adjustments to various programs serving as the final pieces to reach an agreement.

Senate Dynamics and Defense Spending

• ⚖️ The Senate operates with a 53-47 split, leading to significant "horse trading" among different interests.
• 🛡️ Defense spending is included in the broader bill and is expected to increase substantially, potentially reaching around a trillion dollars.
• 🇺🇸 In situations of international conflict, Congress will be advised of US courses of action but will not play a co-equal role in decision-making, with the President likely to have broad support for chosen actions.

Market Reaction to Tax Provisions

• 📈 Markets are primarily concerned with the passage of the bill and the permanence of its tax provisions.
• 📊 There has been a battle between equity and bond markets regarding the bill, with equity markets currently leading due to a desire for immediate gratification over concerns about debt and deficit.
• 🏠 Personal "rooting interests" in provisions like SALT (State and Local Tax deductions) also influence market sentiment.

Bond Market Digestion

• ❓ While a bond market "revenge" is a possibility, current indicators show positive reactions to long-term Treasury auctions.
• 📉 The bond market is digesting the Senate's approach of running from a "current policy baseline," which implies not substantially adding to the deficit when using static models.