This Week’s Takeaways:
- Projections are that the Big Beautiful Bill will be passed, budget deficits will remain at 6.5% of GDP for the next few years, and the economy will grow in 2026 and 2027.
- Vanguard’s outlook is for tariffs at 13%, higher interest rates persisting, and global diversification rewarding investors.
- If you believe things like rent control and regulated fire insurance in California harmfully interfere with basic economics, then you should be concerned that a broad-based approach to tariffs and continued deficit spending will end badly.
- Investors may be complacent about tariff policy given that there’s a lag effect to tariffs, uncertainty takes a while to change corporate behavior, and we could see capital flow away from the U.S. via higher rates and lower valuations.
- Research shows if you include long-term care costs 41% of households are projected to run short of money in retirement compared to just 26% when not included. You need a plan to cover these costs and understand that Medicare does not.
- Plus my latest book recommendation and Things to Do This Weekend in Boston.
The Fiscal Handbook: The One Big Beautiful Bill Endgame by Wells Fargo
Projections are that the Big Beautiful Bill will be passed, budget deficits will remain at 6.5% of GDP for the next few years, and the economy will grow in 2026 and 2027. The deficit and economic outlook beyond then is murky as we don’t know if the Bill’s temporary provisions will be extended again and whether there will be any appetite for spending cuts to keep the budget deficit from growing further.
Stretched dollar, equities boost diversification case by Vanguard
While no one knows where we’re going with tariff policy, this report thinks we’ll get to an effective tariff rate of 13% by year-end (up from 2.5%). Higher interest rates are here to stay because inflation is above the Fed’s 2% target and deficits will be tough to rein in from here. The case for global diversification is strong given U.S. valuations, the next phase of winners from the AI boom could be cheaper companies benefiting from the technology, and U.S. stocks and dollars have historically moved in lockstep and the dollar is weakening.
More on Repealing the Laws of Economics by Howard Marks
Marks’s latest post looks at how rent control and regulated fire insurance in California ended up causing harm by “repealing” the laws of economics and proceeds to explain how a broad-based approach to tariffs that goes well beyond targeted tariffs for national security for example and continued deficit spending also repeal economic laws and will end badly.
Podcast version available here.
Can the World Count on ‘TACO’ Anymore? – Trumponomics Podcast by Bloomberg
Have investors become complacent about the the tariff threat given the perception that Trump always backs down and the hard data hasn’t deteriorated? Perhaps given that there is a lag impact to higher tariff policy as companies work through inventory and the negative impacts of uncertainty take hold for companies and we could see capital flow away from the United States.
A Perfect Storm Is Poised to Raise Long-Term Care Costs. Here’s How You Can Get Ahead of It by Morningstar
The cost of care is growing at triple the inflation rate. Medicare doesn’t cover it. Research shows if you include long-term care costs in your retirement plan 41% of households are projected to run short of money in retirement compared to just 26% when not included. There are 6 ways to cover it outside of traditional long-term care insurance, which I think is still the best bet.
Trend Alert: Temporary Retirement by Heritage Financial
The team looks at the rise in temporary retirement and why more people are embracing it.
Book Recommendation
Lincoln vs. Davis: The War of the Presidents by Nigel Hamilton
I enjoyed this book mostly because it had much I hadn’t read before about how Davis approached the war, but it’s also about 200 pages too long as the author couldn’t get over certain facts that had to be repeated.
From the New York Times bestselling presidential biographer comes the greatest untold story of the Civil War: how two American presidents faced off as the fate of the nation hung in the balance—and how Abraham Lincoln came to embrace emancipation as the last, best chance to save the Union.
Boston Corner
Tough times for Mass. beer brewers amid nationwide downturn by Axios
