--- title: "\"Big and beautiful\" = \"big deficit\", will US stocks be dragged down by US bonds again?" type: "Topics" locale: "zh-CN" url: "https://longbridge.com/zh-CN/topics/29808412.md" description: "Hello everyone, I am Dolphin Research! In last week's strategy report, Dolphin Research mentioned that after the tariff issue was settled, the market's focus would shift back to Trump's second move of tax cuts and industrial policies. "But the fatal BUG here is that tax cuts and industrial stimulus essentially require fiscal backing." Will the upcoming short-term trading revolve around this "BUG," thereby affecting the valuation expectations of the entire major asset classes..." datetime: "2025-05-19T12:52:45.000Z" locales: - [en](https://longbridge.com/en/topics/29808412.md) - [zh-CN](https://longbridge.com/zh-CN/topics/29808412.md) - [zh-HK](https://longbridge.com/zh-HK/topics/29808412.md) author: "[Dolphin Research](https://longbridge.com/zh-CN/news/dolphin.md)" --- > 支持的语言: [English](https://longbridge.com/en/topics/29808412.md) | [繁體中文](https://longbridge.com/zh-HK/topics/29808412.md) # "Big and beautiful" = "big deficit", will US stocks be dragged down by US bonds again? Hello everyone, I'm Dolphin Research! In last week's strategy report, Dolphin Research mentioned that after the tariff issue was settled, the market's focus would shift back to Trump's second wave of tax cuts and industrial policies. "But the fatal BUG here is that tax cuts and industrial stimulus essentially require fiscal backing." Will the upcoming short-term trading revolve around this "BUG," thereby affecting the valuation expectations of the entire asset class? Let's take a closer look: **1\. Trump's 'Big, Beautiful Bill' = 'Big Deficit' Bill?** This new bill, the **'Big, Beautiful Bill'**, mainly extends the tax cut bill passed in 2017, involving tax credits for consumption and overtime, child tax credits, etc., while also slightly tightening Medicaid eligibility and food stamp standards. Overall, it remains a tax cut bill that will significantly increase the deficit, hence it's jokingly called the 'Big Deficit' bill by the market. According to estimates by the U.S. Federal Budget Committee, it will raise the U.S. fiscal deficit for FY2027 (ending September 2027) **from the original $1.7 trillion to $2.3 trillion, nearly doubling the non-interest deficit.** Moreover, the tax cuts under this bill are front-loaded, while the cost-saving measures are back-loaded, resulting in higher deficits in the first half of the 10-year period, especially in FY2026 and FY2027, with contraction only occurring in the latter half. The current reality is that, this year, the Trump administration has led to: a. The DOGE government spending cuts have effectively failed; b. The tariff increases have limited impact on filling the gap: Dolphin Research notes that the U.S. government's recent tariff hikes are estimated to generate around $300 billion in additional revenue (quadrupling the current annual revenue of about $75 billion). In the first month of implementation, tariff revenue doubled, but it's still far from quadrupling. Originally, Besant proposed a "333" plan—to increase daily crude oil production by 3 million barrels, boost GDP growth to 3%, and reduce the deficit to 3% by 2028 under the new administration. But under this tax cut plan, the U.S. deficit ratio could approach 7% by 2034, with the budget deficit for 2025 potentially rising to around 6.9%. **In summary, spending is front-loaded while cost-cutting is back-loaded. Previous DOGE spending cuts and defense reduction plans have largely failed, tax cuts are accelerating, and the U.S. debt ceiling is being further raised. The U.S. Treasury's coffers need to be prepared early.** **2\. The Angry Bond Market: A Silent Protest?** To prepare the Treasury's coffers, financing through bonds is key. The question then returns to: a. Will there be a compliant Federal Reserve to coordinate rate cuts? b. Even if the Fed lowers short-term rates, how can long-term bond yields be kept low enough to attract sufficient buyers? Will a compliant Fed need to directly buy Treasury bonds? **The current issue is that a compliant Fed hasn't arrived, but the market is already reacting. U.S. tax cuts are widening the fiscal gap, and the government is raising the debt ceiling. Long-term bond yields are already showing signs of turmoil!** The 30-year ultra-long Treasury yield has surpassed 5%, and the 10-year yield is nearing 4.5%. **Will the U.S. Treasury return to a stimulus mode, weakening the dollar further?** For now, the Fed remains unwilling to cooperate, and Treasury yields remain high, with the downtrend likely to persist. **For U.S. stocks, another risk is that whenever the 10-year Treasury yield rises above 4.5% and continues upward, the sensitivity of U.S. stocks to this global asset pricing anchor increases, making a correction more likely.** **3\. Portfolio Adjustments and Returns** Last week, Dolphin Research noted that tariff risks had temporarily passed, and the U.S. earnings season confirmed overall stable fundamentals. Dolphin Research gradually increased the weight of equity assets last week, raising equity allocation to 53%. However, Dolphin Research believes U.S. bonds could still pose risks to U.S. stocks, maintaining a defensive stance with a 50:50 allocation for now. Details of individual stock adjustments and reasons are as follows: Last week, Dolphin Research's virtual portfolio Alpha Dolphin returned 1.2%, outperforming the CSI 300 (+1.1%) but underperforming MSCI China (+2%), Hang Seng Tech (+2%), and the S&P 500 (+5.3%). Since the portfolio's inception (March 25, 2022) to last weekend, the absolute return was 86%, with an 84% excess return over MSCI China. In terms of net asset value, Dolphin Research's initial virtual assets were $100 million, exceeding $189 million by last weekend. **4\. Individual Stock Performance** Last week, the Alpha Dolphin portfolio's performance was driven by the recovery of assets due to improved tariff conditions, particularly Vipshop and TSMC. NetEase was added after its earnings-driven rally but didn't contribute to last week's returns. Details of the top gainers and losers are as follows: **5\. Asset Allocation** The Alpha Dolphin virtual portfolio holds 18 individual stocks and equity ETFs, with 7 at standard weight and the rest underweight. Non-equity assets are mainly allocated to gold, U.S. bonds, and USD cash, with a current equity-to-defensive-assets ratio of about 53:47. As of last weekend, Alpha Dolphin's asset allocation and equity holdings are as follows: **6\. This Week's Focus:** The earnings season for Chinese stocks continues this week, shifting to smaller, niche companies. Dolphin Research has summarized the key areas to watch: **Risk Disclosures and Disclaimers:**[**Dolphin Research Disclaimer and General Disclosures**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) Recent Dolphin Research portfolio weekly reports can be found here: ["The Most Down-to-Earth Approach: Dolphin Investment Portfolio Launches"](https://longbridgeapp.com/topics/2764818?channel=t2764818&invite-code=032064) ### 相关股票 - [Trump Media & Tech (DJT.US)](https://longbridge.com/zh-CN/quote/DJT.US.md) - [Invesco QQQ Trust (QQQ.US)](https://longbridge.com/zh-CN/quote/QQQ.US.md) - [Krne Csi China Internet (KWEB.US)](https://longbridge.com/zh-CN/quote/KWEB.US.md) - [Hang Seng TECH Index (STECH.HK)](https://longbridge.com/zh-CN/quote/STECH.HK.md) - [Trump Media & Tech - CW28 (DJTWW.US)](https://longbridge.com/zh-CN/quote/DJTWW.US.md) - [iShares barclays 20+ Yr Treasury Bd (TLT.US)](https://longbridge.com/zh-CN/quote/TLT.US.md) - [Direxion 20+Yr Trsry Bear 3X (TMV.US)](https://longbridge.com/zh-CN/quote/TMV.US.md) - [2x Long VIX Futures ETF (UVIX.US)](https://longbridge.com/zh-CN/quote/UVIX.US.md) ## 评论 (14) - **不卖我就不亏 · 2025-05-22T10:37:10.000Z**: This portfolio outperformed the S&P 500😂 - **大花卷 · 2025-05-22T09:32:01.000Z**: First time seeing this combination, where can I track the holdings of this alpha dolphin? - **龙场悟道忘忧草 · 2025-05-22T05:36:28.000Z**: Is this portfolio of yours a live trading account or a simulated one? - **Dolphin Research** (2025-05-22T08:40:57.000Z): Simulated trading - **龙场悟道忘忧草** (2025-05-22T09:42:22.000Z): Dolphin Research should try a live trading to prove its research capability, so that people won't say it's just hindsight and useless. - **Dolphin Research** (2025-05-22T10:00:00.000Z): We can't do live trading...😂 - **OscarFine · 2025-05-22T01:00:22.000Z**: What is Alpha Dolphin - **Dolphin Research** (2025-05-22T08:40:51.000Z): It's our investment portfolio strategy, updated every Monday - **OscarFine** (2025-05-22T09:02:12.000Z): Brother, I want you to check how Apple is doing now. I want to stop analyzing and see how it goes later, okay? - **Dolphin Research** (2025-05-22T09:59:16.000Z): You can check out our previous analysis and comments, the views are basically unchanged. - **jack船长 · 2025-05-20T05:02:30.000Z · 👍 3**: Using Myanmar-style thinking to trade US stocks? Hahahahahahahaha - **狗元 · 2025-05-19T13:24:47.000Z**: Still holding onto gold tightly? - **Dolphin Research** (2025-05-19T14:33:18.000Z): Long-term allocation, basically holding for years without moving.