The Markets – July 15, 2025

Are financial markets too complacent?

In Aesop’s fable, The Boy Who Cried Wolf, a young shepherd repeatedly raises a false alarm. Eventually, the people in his village ignore his warnings. When a wolf appears, the villagers pay no attention to the boy’s cries, confident that “nothing ever happens”.

Some pundits fear investors have become similarly complacent. “Wall Street’s tolerance for shock is becoming heroic,” wrote Isabelle Lee and Denitsa Tsekova of Bloomberg. “First came the inflation angst, then the tariff crash, then the war in the Middle East. At this point, it’s hard to imagine what could still rattle the investor class.”

Since April’s tariff-induced downturn, investors have pushed U.S. stocks steadily higher, focusing on positive news – resilient U.S. economic data, solid corporate earnings growth, and the potential of artificial intelligence, reported Paul R. LaMonica of Barron’s.

Despite tariff uncertainty, rising deficit and debt levels, and ongoing geopolitical conflicts, the Standard & Poor’s (S&P) 500 and Nasdaq Composite Indexes closed at record highs last Thursday. In addition, the Dow Jones Industrial Average (Dow) was nearing its first new high since December 2024, reported Connor Smith of Barron’s.

Then, on Friday, investor confidence hiccuped.

“Record highs and down weeks don’t typically go together, but the declines themselves are relatively minuscule, especially given the tariff headlines generated during the week—the possibility of 50 [percent] levies on Brazil and 35 [percent] on Canada, among others, if negotiations don’t go well—and continued attacks on Federal Reserve Chair Jerome Powell. The S&P 500, after all, is still up 26 [percent] from its April low and has gained 6.4 [percent] this year,” reported Jacob Sonenshine of Barron’s.

By the end of the week, the S&P 500 and Dow were lower, while the Nasdaq eked out a gain.  Yields on longer maturities of U.S. Treasuries ended higher.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

THE BIG BEAUTIFUL BILL IS NOW THE LAW OF THE LAND. President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on the Fourth of July. The $3.8 trillion tax and spending package is a wide-ranging piece of legislation. The OBBBA’s “extraordinary breadth and ambition position it as one of the most consequential pieces of legislation in recent congressional history,” wrote Holland & Knight law.

The legislation extended the tax changes from 2017’s Tax Cuts and Jobs Act that would have expired later this year. Here is a brief review of some of the new provisions:

• A higher standard deduction. Anyone who doesn’t itemize will benefit from a change in the standard deduction. In 2025, the standard deduction will increase by $750 for single tax filers (from $15,000 to $15,750) and by $1,500 for those who file jointly (from $30,000 to $31,500), according to Michael Townsend of Schwab.
• A larger child tax credit: Families with children may benefit from a $200 increase in the child tax credit. The credit is reduced and phased out at higher income levels ($200,000 of modified adjusted gross income (MAGI) for single tax filers and $400,000 for those who file jointly), reported Kamaron McNair of CNBC.
• A temporary bonus for seniors: From 2025 through 2028, some Americans who are age 65 or older will benefit from a $6,000 special deduction. To qualify, they must have modified adjusted gross income of less than $75,000 for single tax filers or $150,000 for those who file jointly.
• A temporary increase in state and local tax (SALT) deduction caps. The cap for SALT tax deductions, which include property taxes, will be $40,000 in 2025. The amount will increase one percent a year for four years before dropping back to $10,000 in 2030.
• New caps on student loan amounts. The law limits the amounts students and parents can borrow from the government to pay for education. Beginning in 2026, graduate students can borrow $20,500 per year with a lifetime limit of $100,000 ($200,000 if pursuing a professional degree). The student lifetime borrowing limit for federal student loans will be $257,500.

• Elimination of green-energy tax credits. If you’ve been thinking about making energy-efficient home improvements or purchasing an electric vehicle, now is the time. These tax credits will be eliminated at the end of 2025.
• Temporary tax relief on tips and overtime. From 2025 to 2028, workers will be able to deduct up to $25,000 in tips and up to $12,500 in overtime pay.

There are many other provisions – savings accounts for newborns, auto loan interest deduction, higher estate tax exemptions, changes to health savings account eligibility – that may affect your financial plans. If you would like to talk about these changes, please get in touch.

WEEKLY FOCUS – THINK ABOUT IT

“The $3.4 trillion price tag for the OBBBA will drive the national debt to unprecedented levels, but that figure does not include associated interest costs from the higher level of borrowing needed to foot the bill. Interest costs on the legislation will add approximately $700 billion to federal deficits over the next 10 years, bringing the total cost of the legislation to $4.1 trillion.”

― Peter G. Peterson Foundation

Warm regards,

Daniel J. Murphy, CFP®
Murphy Wealth Management Group
60 Merritt Blvd., Suite 106
Fishkill, NY 12524

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