WEEKLY RECAP
- U.S. markets dipped slightly; Nasdaq held up best. Trump announced new tariffs (25% on S. Korea, Japan; 50% on Brazil, copper), with FOMC split on rate cuts.
- European stocks rose but trimmed gains on U.S. tariff threats. UK GDP contracted; Eurozone retail sales fell.
- Japan’s markets slipped amid U.S. tariff plans and weak wage data (real wages down 2.9% YoY), yen weakened.
- China stocks rose on deflation data sparking stimulus hopes; producer prices dropped 3.6% YoY, consumer prices up 0.1%.
- Turkey focuses on disinflation; Bulgaria to adopt euro in 2026.
WEEKLY AHEAD
- July 15, 2025, China National Bureau of Statistics, Industrial Production (June)
- July 15, 2025, China National Bureau of Statistics, Retail Sales (June)
- July 16, 2025, USA Census Bureau, Housing Starts
- July 16, 2025, USA Census Bureau, Building Permits
- July 17, 2025, USA Federal Reserve, Federal Open Market Committee (FOMC) Meeting Minutes (July)
- July 18, 2025, USA Bureau of Labor Statistics, Initial Jobless Claims (Weekly)
MAJOR MARKETS
Name
Dow Jones
S&P 500
Nasdaq
Nikkei 225
HSI
SHI
Last Close
44,371.51
6,259.75
20,585.53
39,569.68
24,139.57
3,510.18
7D%
-1.02%
-0.31%
-0.08%
-0.61%
0.93%
1.09%
THOUGHTS OF THE WEEK
The seismic passage of the “Great Beauty Act” on July 4th represents Trump’s most audacious economic gambit – a $5 trillion fiscal overhaul consolidating tax cuts, defense surges, welfare dismantling, and debt ceiling expansion into a single legislative missile. Its immediate aftermath reveals dangerous fractures: bond markets cratered (10Y yields +80bps), Musk declared political war, yet equities soared to record highs. This paradox exposes the Act’s core tension: engineered short-term sugar rush versus systemic fragility.
I. Structural Blueprint: Four Pillars of Fiscal Revolution
This architecture executes radical “small government” ideology: capital shifted from safety nets to corporate/defense coffers, with austerity pain deferred until post-2030.
Pillar
Corporate Tax Perpetuation
Defense & Border Surge
Welfare Deconstruction
Debt Ceiling Escalation
Key Mechanisms
21% rate lock (averting 35% revert), R&D deduction expansion, accelerated depreciation
$150B military injection (shipbuilding, missiles, border walls)
Medicaid work requirements (80hrs/month), student debt cancellation repeal
$4T → $5T borrowing capacity
DXY Trend
$1.2T revenue loss (2026-2035)
+0.8% GDP stimulus by 2028
$900B savings (post-2030)
Enables deficit financing
II. Ghost of TCJA Past: The Buyback Boom Revisited
The 2017 Tax Cuts and Jobs Act (TCJA) provides the cautionary template:
- Growth Mirage: Promised 0.7% GDP gains yielded mere 0.1% sustained expansion
- Capital Misallocation: 80% of repatriated $1.1T fueled stock buybacks, not Capex or hiring
- Benefit Skew: Shareholders captured 60% gains; workers received <15%
Ominous Parallel: Like TCJA, the “Beauty Act” incentivizes financial engineering over productivity. R&D deductions may subsidize buybacks, while delayed welfare cuts create a 2026-2029 stimulus bubble before the 2030 fiscal cliff.
III. Near-Term Catalyst: The Debt-Fueled Sugar High
Immediate Winners:
- Equities: S&P 500 +7% YTD (tax boosts lift earnings 5% by 2026)
- Sector Surges: Semiconductors (NVDA, TSM), defense (LMT, RTX)
- USD Support: Yield-seeking flows strengthen dollar
Ticking Bombs:
- Deficit Explosion: $4.1T added debt (CBO); $1.3T with tariff revenues
- Bond Market Revolt: Treasury selloff accelerates (10Y +80bps)
- Inflation Reignition: Tariffs + fiscal pump may delay Fed cuts beyond 2025
Musk’s Revolt: Musk’s new “American Party” signals investor alarm over unchecked deficits.
IV. Long-Term Calculus: The Inequality-Debt Vortex
Growth Reality Check:
- White House projection: 2.6% avg GDP growth
- Yale Budget Lab forecast: -0.1% net drag by 2035
Group
Top 1%
Middle 60%
Bottom 20%
Annual Gain/(Loss)
$12,000
$500-$1,500
($1,600)
DXY Trend
Tip income exemption, capital gains relief
Car loan deductions, overtime tax relief
Medicaid cuts, food stamp reductions
*According to Congressional Budget Office（CBO）
V. Sectoral Chessboard: Capitalizing on Asymmetry
Net Beneficiaries (2026-2029):
- Tech/Semis: NVIDIA, TSMC (R&D deductions + 35% fab depreciation)
- Defense Industrial Base: Lockheed, RTX ($150B spending tailwinds)
- Luxury/Experiential: LVMH, MGM Resorts (affluent disposable income surge)
Structural Casualties:
- Green Energy: Tesla (EV credit repeal → $2.8B revenue hit), First Solar
- Healthcare: Medicaid-dependent providers (UnitedHealth)
- Value Retail: Dollar General, Walmart (low-income demand collapse)
Asymmetric Strategy: Overweight AI/defense supply chains; pair long luxury/short consumer staples.
VI. Conclusion: Navigating the Debt Mirage
The “Great Beauty Act” delivers immediate market amphetamines while mortgaging America’s future, a deficit-deferred, inequality-amplifying time bomb. Its sustainability hinges on two make-or-break pivots:
- Corporate Alchemy: Will tech/defense giants convert tax breaks into productivity (AI, reshoring) or financial engineering?
- Debt Tolerance Test: Can Treasury markets absorb $5T issuance without yield spikes triggering recession?
Investor Imperatives:
- Front-run defense/AI Capex beneficiaries (TSM cloud fabs, RTX missile systems)
- Build inflation bunkers (TIPS, industrial metals)
Monitor inequality barometers (WMT vs. COST sales divergence)
The Act’s “beauty” is strictly cosmetic – its legacy will be written in red ink and social fractures.
DISCLAIMER
Chart of The Week: Sources: Bloomberg, Coindesk, Cointelegraph, Forbes, Rados.io, Linux Research
Market Cap & Trading Vol.: Sources: Coinmarketcap, Linux Research
Thought of The Week: Sources: AON, Bloomberg, Blockchain.com, CCN, Coindesk, Cointelegraph, Ethereum World News, Gemini, Insurance Journal, Los Angeles & San Francisco Daily Journal, Linux Research
Week Ahead: Sources: FxStreet.com, Linux Research
Weekly Recap: Sources: FxStreet.com, Linux Research
Past performance does not guarantee future results.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any cryptocurrencies. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
©Linux Group, October 2024.
Unless otherwise stated, all data is as of October 7, 2024 or as of most recently available.
