Have Financial Markets Grown Overly Complacent?
The classic fable of “The Boy Who Cried Wolf” serves as a cautionary tale: repeated false alarms can lead to dangerous complacency. Some observers of financial markets fear that investors are exhibiting a similar lack of vigilance. As noted by Isabelle Lee and Denitsa Tsekova of Bloomberg, “Wall Street’s tolerance for shock is becoming heroic.” They highlight a series of recent anxieties—inflation concerns, tariff-induced downturns, and conflict in the Middle East—suggesting that it’s “hard to imagine what could still rattle the investor class.”
Following a tariff-related market dip in April, investors have steadily propelled U.S. stock values upward. According to Paul R. LaMonica of Barron’s, this upward trend has been fueled by a focus on positive economic indicators, robust corporate earnings, and the perceived potential of artificial intelligence.
Despite persistent uncertainties surrounding tariffs, increasing national deficit and debt levels, and ongoing geopolitical conflicts, both the Standard & Poor’s (S&P) 500 and Nasdaq Composite Indexes reached record closing highs last Thursday. The Dow Jones Industrial Average (Dow) was also approaching its first new high since December 2024, as reported by Connor Smith of Barron’s.
However, this seemingly unwavering investor confidence experienced a sudden tremor last Friday.
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
Sources:
https://en.wikipedia.org/wiki/The_Boy_Who_Cried_Wolf
https://www.bloomberg.com/news/articles/2025-07-11/battle-hardened-wall-street-bulls-are-proving-very-hard-to-scare or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Bloomberg-Battle-Harderned-Wall-Street%20-%202.pdf
https://www.barrons.com/articles/stocks-record-goldilocks-risks-25610b9f?refsec=markets&mod=topics_markets or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-Stocks-Are-Hitting-Records%20-%203.pdf
https://www.barrons.com/livecoverage/stock-market-news-today-071025 or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-Dow-Falls-Nearly-280-Points%20-%204.pdf
https://www.barrons.com/articles/second-quarter-earnings-s-p-500-record-highs-ed489727?refsec=the-trader&mod=topics_the-trader or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-How-Second-Quarter-Earnings%20-%205.pdf
https://www.barrons.com/market-data?mod=BOL_TOPNAV or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/07-14-25-Barrons-DJIA-S&P-Nasdaq%20-%206.pdf
https://www.schwab.com/learn/story/tax-bill-moves-on-to-senate-whats-next
https://www.cnbc.com/2025/07/09/trump-spending-bill-child-tax-credit.html