If you followed the seasonal investing advice of “sell in May and go away,” you may want to reconsider because the outlook for the economy and financial markets will likely be determined in the coming months.
Several major events, datasets, progress reports, and deals are due this summer. By fall, the impact of President Donald Trump’s tariffs and fiscal policies should be clearer, giving the Federal Reserve enough confidence to act on interest rates.
Here’s a look at the factors that will tip the scales:
One Big Beautiful Bill
A key piece could come as soon as this week. Trump has set a July 4 deadline for Congress to pass his so-called One Big Beautiful Bill, which contains his tax cuts and spending priorities.
While the House of Representatives passed one version of the legislation and the Senate advanced a separate one, the GOP’s narrow majorities in both chambers make the timing of the eventual package and its exact provisions less certain.
All the congressional logrolling that’s needed could push the timeline past July 4, especially now that a few Republicans have announced they will not seek re-election, making them less susceptible to Trump’s arm-twisting.
Wall Street expects the tax cuts to juice the economy and the stock market, while the bond market will watch the bill’s impact on U.S. debt. The Congressional Budget Office has estimated the Senate’s version of the bill will add nearly $3.3 trillion to deficits over a decade.
More fiscal sticker shock could send Treasury yields higher and add more pressure on the dollar, which is already down 10% this year, its worst first-half performance in more than 50 years.
Debt ceiling
Treasury Secretary Scott Bessent has estimated that the U.S. will no longer be able to pay its bills by mid to late summer, unless the debt ceiling is raised.
While he has vowed that the U.S. will never default, it’s up to Congress to raise the debt limit so that the Treasury…