Financial encyclopedia

The "Big and Beautiful Act" covers several important areas, including: 

Tax reduction measures: Targeting enterprises and high-income groups to enhance competitiveness and economic growth. 

Infrastructure investment: Pouring in huge funds to improve infrastructure and create jobs. 

Semiconductor and high-tech subsidies: Encourage building factories in the US to reduce reliance on foreign countries. 

Defense and security spending: Increase military expenditure to address geopolitical risks. 

Social welfare and medical expenditures: Funds are allocated to safeguard vulnerable groups. 

The bill will help boost the economy in the short term and bring multiple benefits, including promoting GDP growth, especially in the manufacturing and technology sectors; creating job opportunities; enhancing national security and supply chain autonomy; and helping the United States cope with the risks of economic slowdown. 

Potential Risks and Challenges 

The Congressional Budget Office estimates that the bill will increase the deficit by approximately $3.3 trillion over the next decade, and the total debt may exceed $50 trillion before 2032. 

The debt burden has increased and the market is worried about the ability to repay debts. The credit rating of the United States was downgraded from Aaa to Aa1 in May this year. 

Large-scale bond issuance may push up the yield rate, cause long-term bond prices to fall and increase financing costs. 

Global funds are gradually "de-dollarizing", with some central banks reducing their holdings of US Treasuries, and the status of the US dollar is being challenged. 

Lessons from the Investment Market: 

It is advisable to hold bonds for a short period rather than a long one. 

The US deficit has increased, and the market is concerned that bond yields will rise. If long-term bond yields rise, prices will fall sharply, and the risk is relatively high. Short-term US bonds are more stable, and interest rates remain at a high level. 

Diversify currency risks 

If the US dollar weakens, one can allocate some assets in euros and Australian dollars or increase holdings of gold as a hedge. 

Observe the flow of funds 

The "de-dollarization" trend continues, and funds may flow to European and emerging market bonds. 

Although the bill brings economic benefits, it also plants the seeds of fiscal and debt risks. Investors should be cautious in their deployment, flexibly adjusting the maturity of bonds and currency allocation to guard against potential risks.