This Week in Review | One Big Beautiful Bill Act, US Jobs Data (July 4, 2025)

Transcript

Ben Thistlethwaite:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments that you might have missed this week, and we'll talk about what they mean for markets, and most importantly, the potential impact for investors.

Now, let's review what happened this week.

First, the One Big Beautiful Bill.

This week, there's been a lot of talk about the One Big Beautiful Bill Act, as Republicans in Congress work to push through President Trump's priorities. So, what does the bill mean for investors? At its core, the bill extends parts of the 2017 Tax Cut and Jobs Act, including higher standard deductions and lower tax rates for most households. If no version of the bill passes this year, those provisions would expire, meaning higher taxes for many people next year. Some parts of the bill have sparked debate, though. For example, many are worried about the bill's potential impact of raising the national debt. Now, it's important to remember that markets always factor in widely-known information and risks. And with 10-year Treasury yields below where they started the year, markets don't seem overly concerned about America's ability to pay its bills. And that all makes sense, because even with rising absolute debt levels and higher interest rates we've seen in recent years, debt servicing costs remain within a range that's proven largely manageable in the past.

Next, US jobs data.

It was a busy week for US labor market data. On Tuesday, the US reported that job openings climbed to 7.8 million in May, exceeding expectations. That figure was up from 7.4 million in April. On Wednesday, the Challenger Job Cuts report for June showed just under 48,000 layoffs, decelerating sharply from around 94,000 in May. What are the takeaways for investors? Well, job data gets a lot of media hype because it's seen as an important indicator of where the economy is going. But we believe these numbers are actually backward-looking. They show what's already happened, not where the economy is headed. For example, businesses typically hold off on hiring until they've maximized their current workforce, and businesses also tend to avoid layoffs until it's absolutely necessary. It's broader economic growth, or lack thereof, that drives these trends and not the other way around. Stocks, on the other hand, are forward looking. They move on investors' expectations for economic and earnings growth over the next 3 to 30 months. That means they've already factored in whatever June's job numbers reveal. So, we'd caution investors against focusing too much on the noise of backward looking-job reports.

That's it for this US holiday shortened week.

Thanks for tuning in to This Week in Review.

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