Key Takeaways from Senate-Passed Tax and Spending Bill

On July 1, the U.S. Senate Republicans passed President Trump’s tax-and-spending bill. The bill had 51 for and 50 against. It will not pass to the House for approval.The bill extends Trump’s tax cuts introduced in 2017. The tax breaks for income from tips and overtime pay are a positive development. It would increase the disposable income for consumers. That would help restaurant firms like Starbucks (SBUX), McDonald’s (MCD), and Chipotle (CMG).The bill cuts over $900 billion from Medicaid health programs. Low-income Americans would also get less food aid. This might hurt discount stores like Walmart (WMT), Dollar General (DG), and Dollar Tree (DLTR). Those stocks trade near their 52-week high.The Senate version of the bill will add $800 billion more to the U.S. national debt than the House version. For now, treasury bills like the 20+ Year ETF (TLT) are trending higher. Conversely, the U.S. dollar continued to weaken. The currency’s performance might have more to do with the lack of progress in tariff negotiations.Your TakeawayThe cut in Medicaid is a headwind. The healthcare sector will grow increasingly less attractive for investors. Elevance (ELV), CVS Health (CVS), and UnitedHealth (UNH) might underperform the markets. Drug firms like Pfizer (PFE), Merck (MRK), and Bristol-Myers Squibb (BMY) may also perform poorly.