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- Big And Beautiful Federal Spending To Boost Markets (Plus TSLA thoughts)
Big And Beautiful Federal Spending To Boost Markets (Plus TSLA thoughts)
Daily Update on SPY, QQQ, TLT, USO, BTC, COIN, Mag-7, Gold, PLTR
Yimin Xu
July 07, 2025
Hi YXI friends,
Today we will tackle three key topics in today’s market:
How will the Fed act after Thursday’s Nonfarm Payrolls data?
What is the impact of the One Big Beautiful Bill Act on the short-term and long-term rates?
Is the Tesla stock headed for new lows after Elon Musk’s American Party announcement?
Housekeeping: I am on a family trip on Friday July 11th to Monday July 14th. The daily YXI Signals will be sent out as usual, but I won’t be able to provide the weekly video / full macro update on these two days.
If you are looking for our Systematic Signals directly, you can find them in our dedicated morning note on SPY, QQQ, BTC, TLT, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA (free), PLTR (free).
Let’s dive in!
Table of Contents
DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
1. Nonfarm, 1BBB, Tesla
Yet Another Strong Nonfarm Payrolls Report
The June Nonfarm Payrolls report arrived last week with 147k net new jobs added. This is the 8th consecutive 100k+ print since November.
Moreover, both the April and May figures were revised modestly higher. At the same time, the US unemployment rate dipped to 4.1%.
Overall, this was another solid set of gains that should deter the Fed from hurrying to cut rates.
What drove this month’s large gain? The Government and Healthcare.
The Government made 73k net new hires, coinciding with Elon’s DOGE absence, while the Healthcare sector added 59k new jobs.
Fiscal Expansion Is Bigger And More Beautiful
The One Big Beautiful Bill (1BBB) raises the US Debt Ceiling by $5 trillion. In my opinion, they might as well just remove the debt ceiling as a concept altogether. It no longer serves the purpose of limiting fiscal spending, but is used more of a political bargaining tool between the Republicans and the Democrats.
1BBB extends most of the expiring tax cuts and allocates new funding to infrastructure, defence, and social programs. The Congressional Budget Office projects that 1BBB would increase the primary deficit by $2.4 trillion over the 2025-2034 period.
How should the new fiscal spending impact the bond, credit, and equities market?
For bonds, 1BBB likely has a yield curve “bear steepening” effect. This means yields should rise, but the long-term rates likely rise more than the short-term rates.
A larger budget deficit increases the supply (Treasury issuance) pressure on long-term bonds, which increases the term-premium (extra yields) demanded by investors. For the short-end rates, greater fiscal spending could drive a tighter labour market and higher inflation. It results in an upward drift of the neutral interest rate. The Fed likely keeps the rates higher for longer in this scenario.
Greater fiscal spending could stimulate the economy and uplift stocks and credit (credit spreads tighter). Business Development Companies (BDCs) could particularly benefit from the sustained higher short-term rates to maintain their investment yields. The default risks of risky companies could fall and consequently boost investor appetite in credit and stocks.
How will it all end? Maybe with another bubble like 2007, bursting at some point. But it may not matter for those who get paid annual bonuses in the lead up to it.
Elon’s American Party
Elon announced that he will form an American Party over the weekend, as the 1BBB significantly increases the chance of a US bankruptcy. It also undoes all of the DOGE work Elon did at the beginning of the year.
Elon plans to laser focus on a few seats (e.g. 10 in the Congress and 3-4 in the Senate) to become a Third Party that both the Republican and the Democrats need to make deals with permanently. Given the thin margins, this could work.
The question is whether Trump will go after Elon’s businesses in the lead up to the Mid-terms in retaliation, whether it’s SpaceX contracts or regulatory blockade on Tesla’s robotaxi networks. Trump has also repeatedly highlighted Elon’s unAmericanness - pointing out that Elon would be back to South Africa without the federal incentives and they could look into Elon’s immigration history.
At this point, it’s unlikely we see truce between the two men in the near term.
Since January 2023, TSLA has moved in a predictable, but volatile pattern, upwards in an “ending diagonal”.
We observe a 3-wave (A-B-C) pattern on the way up and on the way down.
In both of the upward moves, Wave As were about 100% up, i.e. the stock doubles from the low. Wave A tops also tend to be falling just short of the prior highs. We then get a Wave B retrace that undoes about 50-60% of the Wave A. Then Wave C would exceed the 100% of Wave A from Wave B low.
Currently, we are still in the Wave A phase of this final upward move of Wave (5). We have seen a local top at about 70% over the prior low. This means Wave A is unlikely done here yet.
For Wave A of (5), $430 is a reasonable target (give or take 10% each side).
2. SPY, QQQ, (SPDW)
SPDW is updated every Monday.
SPY has now reached the 1.618 extension of wave (i). It is yet to reach the trend line resistance overhead. It could push towards it next before a major pullback.
QQQ is now pushing towards the 200% extension of wave (i). There isn’t clear resistance until $572.
3. FOMC Projections & Rates Futures
FOMC Projections
We use the Fed Funds futures market to understand the market expectations of future FOMC interest rate decisions.
FOMC Date | Before Meeting | Post Meeting | Hike/ Cut in % |
|---|---|---|---|
07/30/25 | 4.33 | 4.33 | 0 |
09/17/25 | 4.33 | 4.13 | -0.2 |
11/05/25 | 4.13 | 3.93 | -0.2 |
12/17/25 | 3.93 | 3.78 | -0.15 |
01/28/26 | 3.78 | 3.68 | -0.1 |
03/18/26 | 3.68 | 3.58 | -0.1 |
05/06/26 | 3.58 | 3.48 | -0.1 |
06/17/26 | 3.48 | 3.38 | -0.1 |
07/29/26 | 3.38 | 3.28 | -0.1 |
Yields were higher after Nonfarm Payrolls. The market now expects 4 cuts in the next 12 months, without a clear push for the 5th cut.
3-month SOFR Futures Yields
4. Summary Of Today’s 4-3-2-1 Ratings
SPY, QQQ, BTC, AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA, PLTR, TLT
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