In early July, Congress passed the “One Big Beautiful Bill Act,” which made the 2017 tax cuts permanent, and President Trump signed it on July 4. This new regulation extends both individual and corporate tax cut rates and eliminates uncertainties, especially after 2025. Goldman Sachs and other economists predict that this will support economic growth by around 0.2-1.2 points in the short term. However, in the long term, it risks increasing inflationary pressure by widening the budget deficit. In short: the wind is at our back in the short term, but the bill may arrive at the door soon.
Public Spending and Sectoral Revival
The new law increases budgets allocated to defense, infrastructure, construction, and immigration policy. Public spending in these areas benefits companies operating in sectors such as the defense industry and infrastructure facilities in particular. Investors can benefit from this by choosing stocks that will benefit from these public projects.
Trade Relations and the Impact of a Weak Dollar on Profitability
On the other hand, the ongoing trade negotiations also provide positive signals for the markets. Agreements with Taiwan, China, Vietnam and the United Kingdom suggest that future tariffs may ease. A weaker US dollar will make the foreign exchange earnings of American multinationals that export more valuable, contributing to their balance sheet performance.
Fed Policy Easing Expected
In June, the Federal Reserve kept interest rates steady at 4.25%-4.50% and announced that they expected two rate cuts by the end of the year. Goldman Sachs took this expectation a step further, suggesting the possibility of three 25 basis point cuts during the year. The market assumes that this easy monetary policy will continue and that the moderate decline in inflation is sustainable. This could be a driver for growth stocks and broad market assets such as the S&P 500.
Oil Price Fall and Its Impact on Inflation
Oil prices have been on the downside in recent weeks. This decline both reduces consumer energy costs and helps offset the inflationary impact from tariff pressures. Thus, the Fed's 2-3 interest rate cuts become more easily applicable, because inflationary price pressures do not continue.
What Does the Technical Outlook Tell Us?
Despite all these positive fundamentals, the S&P 500 index (SPX) is moving well above its moving averages in the short term - technically, it is approaching the "overbought" region. In such times, it is possible to see a period of sideways movement or pullbacks in prices.
So What Should Investors Do?
The most strategic approach here is to wait for prices to pull back to support levels instead of "buying at the peak of the trend". Then, gradually add the S&P 500 ETF or good stocks with strong fundamentals to the portfolio.
With this strategy, investors will not miss out on upward opportunities and can create a more controlled portfolio dynamic without being exposed to correction risk.
In short, positive winds continue in the US markets until the end of the year with the support of tax cuts, public investments, trade agreements, a weak dollar, interest rate cuts and falling oil prices. However, technically, the SPX is approaching the overbought territory in the short term, meaning that the risk of a small correction is also on the table.
