Big, Beautiful (S&P 500) Bill Passed

S&P 500 Will Benefit From Bill

The all-time high in the S&P 500 on Thursday won’t be the last after the House passed Trump’s Big, Beautiful (Tax) Bill on the same day.

The passage of the Bill marks a complete reversal in Trump’s economic strategy, shifting from cuts to government spending, fiscal restraint, and responsible government to growing the economy to outpace debt, increasing deficits, and increased wealth inequality.

That’s not meant to be a political statement or highlight a bias.

In our 31 October 2020 post, we highlighted that Biden was warning that the U.S. was showing all the signs of a K-shaped economy, where economic recovery is uneven, with the wealthy seeing a rapid recovery while the less affluent struggle.

In office, the Biden administration’s loose and dovish fiscal impulse accelerated the K-shaped economic recovery.

The U-turn in Trump’s economic policy highlights that, irrespective of whether the party in office is red or blue, the economic challenge and fallout from the Global Financial Crisis (GFC) inevitably lead to an economic policy driven by the money printer and currency debasement.

That’s how the fiat system works.

Money Printer

Trump’s recent post regarding the Bill was a reinforcement of the same:

“For all cost cutting Republicans, of which I am one, REMEMBER, you still have to get reelected. Don’t go too crazy! We will make it up, times 10, with GROWTH, more than ever before.”

When you can print the global reserve currency, you’re going to do it.

The fiscal (and monetary) stimulus will promote GDP growth; however, growth in inflation, national debt and wealth inequality are likely.

The U.S. need to grow GDP by an average of 5% or more per year for the next 10 years to offset the spending in the Bill. Levels of GDP growth not seen in the U.S. since 2000.

That will likely require an acceleration in the rollout and adoption of AI and robotics.  

That said, investors put politics aside and trade based on the market dynamics presented.

Assets will benefit from the economic policies adopted by the Trump administration, just as they did under the Biden administration.

The S&P 500 has more all-time highs on the horizon.  

S&P 500 Key Levels

The S&P 500 opens in positive gamma today.

The gamma flip zone has moved up and now sits at 6096; the call resistance level is 6284, and the put support level is 5928.

Looking at the chart with a technical analysis lens, while the path of least resistance is to the upside, the probability of a pullback at this level is 70 to 80%.

Expect any pullbacks to be shallow and bought.