Q2 Market Update & One Big Beautiful Bill Act

In the second quarter, the financial markets demonstrated remarkable adaptability amid significant policy and geopolitical headwinds. Trade policy announcements from Washington in April and Middle Eastern conflicts in June created substantial investor uncertainty. Despite these challenges, domestic stocks delivered impressive returns with many indices closing the quarter at or near record levels.

The abrupt change in market direction, after a challenging first quarter, serves as a valuable lesson for long-term investors about the importance of maintaining discipline and perspective when short-term volatility challenges fundamental investment strategies.

Overseas, both developed and emerging market stocks continued to outperform US stocks. Gains were supported by easing tariff concerns, a declining dollar and lower stock valuations compared to US equities.

Bonds also provided positive returns, despite uncertainty regarding the future of interest rates and growing tension between the White House and the Fed.  Long term, we anticipate interest rates will decline, although more slowly than had previously been forecasted. We continue to extend our bond maturities to lock in today’s rates for years to come.

Category	Index	2nd Quarter	Year To Date
Bonds	Bloomberg US Aggregate Bond	1.2%	4.0%
US Large Stocks	S&P 500	10.9%	6.2%
US Small Stocks	Russell 2000	8.5%	-1.8%
International Stocks	MSCI World ex US	12.0%	19.0%
Emerging Markets	MSCI Emerging Markets	12.0%	15.2%
Real Estate	Dow Jones US REIT	-1.7%	-0.5%

One Big Beautiful Bill Act

President Trump’s “One Big Beautiful Bill” has finally worked its way through congress and been signed into law. The biggest benefit of the law is that many of the tax cuts from 2017 which were set to expire in 2026 are now “permanent” and adjusted for inflation. Eliminating the expiration date on these tax rates reduces the complexity in planning for the future.

Key tax-related components of this law include:

• Maintaining the current tax brackets of 10%, 12%, 22% 24%, 32%, 35% & 37%.

• The standard income tax deduction is increased to $15,750 for single filers and $31,500 for joint filers.

• Child tax credit is increased to $2,200.

• The estate tax exemption is increased to $15 Million per person.

• Benefits of itemized deductions are limited high income taxpayers.

• Increased the Alternative Minimum Tax (AMT) deduction.

• State and Local Tax (SALT) deduction is increased from $10,000 to $40,000 for taxpayers earning less than $500,000. In 2030, this limit reverts to $10,000.

The law also included several temporary tax provisions designed to make good on some targeted campaign promises. The following provisions expire after 2028:

• Additional $6,000 deduction for seniors earning less than $75,000 ($150,000 for joint returns).

• Auto loan interest will be deductible up to $10,000 for cars assembled in the US. This deduction is available whether or not you itemize your deductions.

• Deduction for up to $25,000 in tips for individuals earning less than $150,000.

• Deduction for up to $12,000 in overtime pay for individuals (25,000 married) earning less than $150,000.

In addition to the tax provisions, the law addressed many other administration priorities including:

• Medicaid funding cuts.

• Phase out of clean energy credits.

• Tax incentives for expanding us manufacturing.

• Increased defense spending.

• Increased immigration enforcement.

One surprising provision is the introduction of Trump Savings Accounts for children to use for education, starting a business or buying a first home. In addition to contributions from parents and family members, children born from 2025 through 2028 will receive a $1,000 contribution from the government. 

If you have any questions about the market developments, policy changes, or the new provisions introduced in the “One Big Beautiful Bill,” we encourage you to reach out. Whether you're curious how these shifts might affect your portfolio, tax strategy, or long-term financial goals, we're here to help you navigate the evolving landscape with clarity and confidence.