| How the OBBBA is Reshaping Stocks |
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| | On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA), a landmark fiscal package passed by Congressional Republicans. | What matters most to investors? | It extends 2017 tax cuts, adds relief for small businesses, and funds infrastructure, defense, and border security. The Congressional Budget Office projects a 0.8% long-term GDP boost from increased spending and investment, but the bill’s $3 trillion debt increase raises fiscal concerns. Markets climbed to new highs in the short trading week preceding the bill’s signing, yet rising 10-year Treasury yields at 4.2% signal inflation risks. The OBBBA’s “Buy American” policies may disrupt supply chains, while deregulation spurs competition.
| Ultimately, investors can tap opportunities in construction, manufacturing, and defense but have to thread the needle between ongoing trade and policy uncertainties.
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| | | | Competition | The OBBBA tilts the playing field toward U.S. companies, intensifying competition in infrastructure, manufacturing, and defense. Large firms with deep cash reserves are primed to win federal contracts, while small businesses gain breathing room through a permanent 20% deduction on qualified business income. | On the global stage, the bill’s protectionist measures, like scrapping tariff-free entry for shipments under $800, may trigger trade disputes, raising costs for companies reliant on imports. | In technology, looser regulations could unleash innovation but also pit startups against established players. | Banks stand to profit from lending to infrastructure projects, though higher interest rates may squeeze their margins. | Investors should focus on firms with a track record of securing government deals and strong domestic operations to thrive amid heightened competition. |
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| | Infrastructure and Manufacturing Surge | The OBBBA’s full expensing for capital investments and factory construction, effective retroactively from January 19, 2025, is a game-changer for infrastructure and manufacturing. | These measures encourage companies to build in the U.S., boosting demand for construction equipment, steel, and labor. Federal spending on roads, bridges, and defense projects further fuels this surge, with the Bureau of Labor Statistics forecasting 1.5 million new jobs by 2028. | The bill’s push for domestic production, backed by “Buy American” rules, supports reshoring but risks delays from supply chain snags and labor shortages. Firms with automated processes and local suppliers hold an edge. | Note, though, that the phase-out of wind and solar tax credits after 2026 may signal slowed momentum for GreenTech and EV stocks. |
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| | Risks | The OBBBA’s ambitious scope brings significant risks. Inflation could erode purchasing power and corporate profits, especially if the Fed responds with continued rate elevation (or even hikes!). In this case, small-cap and cyclical stocks would feel the pinch most. | Trade tensions, sparked by protectionist measures like higher visa fees, could invite retaliatory tariffs, disrupting supply chains. The bill’s $3 trillion debt increase may push bond yields higher, challenging broad-market stock valuations. | Small firms chasing new contracts may overextend themselves, while larger players with solid finances are better equipped to adapt. | Investors should diversify holdings and prioritize companies with resilient balance sheets to cushion against these uncertainties. |
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| | The Main Takeaway | The OBBBA fuels economic growth through tax relief and spending but risks inflation and trade friction.
✅ Construction, manufacturing, and defense sectors offer strong opportunities, especially for firms with domestic operations.
❌ Investors must brace for Fed rate extensions (or hikes) if inflation spikes, as well as supply chain issues, favoring companies with financial strength. |
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| | | Caterpillar (NYSE: CAT) Caterpillar’s heavy machinery dominates infrastructure projects. With 60% of revenue from the U.S. and investments in automation, it’s built to handle labor shortages and deliver steady cash flows.
Investors should monitor construction spending trends and raw material costs, as these could influence margins, but Caterpillar’s market leadership makes it a solid bet for OBBBA-driven growth. |
| | Lockheed Martin Corporation (NYSE: LMT) A defense giant, Lockheed Martin benefits from the OBBBA’s $150 billion defense boost, including missile systems and AI-driven innovation, with the bill’s $29 billion allocation for shipbuilding and $16 billion for military innovation directly benefit Lockheed’s naval and tech divisions. |
| | Nucor Corporation (NYSE: NUE) Nucor’s steel production aligns with the bill’s manufacturing push. Its low-cost model and focus on sustainability protect margins against inflation. Recent expansions in rebar and sheet steel capacity position Nucor to meet rising domestic demand. With a history of disciplined capital allocation, the company offers stability and growth. Investors should watch steel price volatility and trade policy impacts, but Nucor’s operational efficiency and market share make it a strong pick. |
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| | That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next. | Best Regards,
—Noah Zelvis
Macro Notes |
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