Hedgie's Market Edge - May 27, 2025

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Hey everyone, Hedgie here! Welcome to this week's market breakdown. I hope you all had a wonderful Memorial Day weekend. Since the markets were closed yesterday for Memorial Day, I'm getting this newsletter out to you Tuesday morning instead of our usual Monday schedule. I'm going to walk you through everything that happened in the markets last week and explain what it means for regular investors like you. This was a week where the bond market took center stage, with rising yields creating headwinds for stocks as fiscal concerns returned to the spotlight.

All three major indices finished the week with modest declines, with the S&P 500 down 2.6%, the Dow down 2.4%, and the Nasdaq down 2.5%. This pullback came after the previous week's strong rally, as investors digested new fiscal policy developments and fresh trade tensions. As of Monday afternoon when this newsletter was prepared, stock futures were pointing to a strong higher open on Tuesday (S&P 500 futures +1.27%, Nasdaq futures +1.47%, Dow futures +1.09%) as traders look ahead to key economic data releases this week.

Note: This newsletter was prepared on Monday afternoon for Tuesday morning release due to the Memorial Day holiday. Market conditions may have changed by the time you're reading this.

FISCAL FEARS AND BOND MARKET JITTERS: WHAT HAPPENED LAST WEEK

Last week brought several significant developments that shifted market focus from trade optimism to domestic fiscal concerns:

The "One Big Beautiful Bill" Passes the House

The biggest domestic policy news came Thursday when the House passed the reconciliation bill by the narrowest of margins - just one vote. This legislation, dubbed the "One Big Beautiful Bill," primarily extends the 2017 tax cuts and includes several new proposals that were highlighted during the Trump campaign.

The bill includes tax breaks for tips, overtime pay, and seniors, while raising the state and local tax (SALT) deduction cap to $40,000 from the current $10,000 for those earning under $500,000. To help offset costs, the bill includes reductions to renewable energy incentives, tightened eligibility for health and food aid programs, and Medicaid work requirements.