July Market Recap
Solid earnings results, particularly from AI and tech companies, helped propel stocks higher in July. A combination of “Goldilocks” economic data and renewed trade agreements further supported the rally. So far, the US economy has continued to grow at a healthy pace, with second quarter GDP growth of 3%.
International equities continued their run and are outperforming their US counterparts by the widest margin in a decade.
Turning to bonds, the Fed held interest rates steady at its July meeting and maintained its “higher-for-longer” posture, relying heavily on hard data in making decisions. Market observers are still expecting at least two rate cuts by the end of 2025.
The One Big Beautiful Bill Primer - Personal Income Tax
The President’s push to pass the One Big Beautiful Bill Act (OBBB) by the Fourth of July holiday was a legislative win for the administration. The bill enacts sweeping changes to federal tax law. Most notably, it permanently extends the personal income tax brackets established by the 2017 Tax Cuts and Jobs Act (TCJA) and introduces several key updates. Below is a summary of some of the most significant provisions.
Standard Deduction
Effective in 2025, the standard deduction increases for all filing statuses. This expansion is permanent.
| Filing Status | 2025 TCJA | 2025 OBBB |
|---|---|---|
| Single | $15,000 | $15,750 |
| Head of Household | $22,500 | $23,625 |
| MFJ | $30,000 | $31,500 |
| MFS | $15,000 | $15,750 |
Senior Personal Exemption
From 2025 through 2028, taxpayers aged 65 and older will receive an additional $6,000 exemption, subject to AGI limits. This provision loosely fulfills the President’s campaign promise to make Social Security income tax-free.
State and Local Tax Deduction
Starting in 2025, the $10,000 cap on SALT deductions increases to $40,000 with a 1% annual adjustment. This has been one of the most demanded changes over the past eight years, especially for residents of high-tax states like Oregon. The new SALT deduction, however, is subject to income phaseouts and will revert to $10,000 in 2030.
Gift and Estate Tax Exemption
Beginning in 2026, the exemption increases to $15 million (from $13.99 million) and will be indexed for inflation. This effectively means, on the federal level, estate planning for most individuals should focus on income tax mitigation, basis reset maximization, and intergenerational wealth transfer strategies.
No Tax on Tips
From 2025 through 2028, service industry workers who receive cash tips “customarily and regularly” may deduct up to $25,000 from taxable income. This provision applies only at the federal level. It represents a partial fulfillment of the President’s campaign promise to make tip income tax-free and aims to provide meaningful tax relief to millions of lower- and middle-income workers.
No Tax on Overtime
Also from 2025 through 2028, taxpayers may deduct up to $25,000 of qualified overtime compensation, as defined under Section 7 of the Fair Labor Standard Act of 1938.
Section 199A Deduction
Starting in 2025, the 20% qualified business income (QBI) deduction is permanent, a big win to many small business owners. A modest expansion of the phase-out thresholds will take effect in 2026 and subsequent years.
| PROVISION | DURATION | SUBJECT TO PHASEOUT? | ANNUAL INCREASE? |
|---|---|---|---|
| Standard Deduction | Permanent | No | Yes, adjusted for inflation |
| Senior Personal Exemption | Ends after 2028 | Yes | No |
| SALT Deduction | Ends after 2029 | Yes | Yes, 1% annually |
| Gift & Estate Tax Exemption | Permanent | No | Yes, adjusted for inflation |
| No Tax on Tips / No Tax on Overtime | Ends after 2028 | Yes | No |
While the OBBBA delivers notable tax benefits, many of its provisions are subject to limitations, expiration dates, and income thresholds. As always, careful and informed tax planning is essential to taking full advantage of the changes.
The Modern China
During a recent trip I (Henry) took to Hong Kong and Shenzhen, home of Chinese powerhouses like Huawei and BYD, I witnessed some massive transformations since my last visit almost a decade ago. They are truly mind-blowing! I am eager to share a few of them here.
Cross-border travel patterns have shifted.
Hong Kong is facing a new and familiar shift – because China has now fully reopened, many Hong Kongers opt to spend weekends and holidays there, with Shenzhen being the closest and easiest destination, where costs are significantly lower but service quality is often better! We experienced this firsthand. This has led to numerous closings, empty retail shops, and a depressed commercial real estate rental market in Hong Kong.
Huawei has a major retail presence.
Huawei retail stores are everywhere in Shenzhen – they look very much like Apple stores.
Electric vehicles dominate the roads.
Electric vehicles (EVs) dominate Chinese roads and most of them are domestic brands, from household stalwarts like BYD to lesser-known players such as Maxus and Aion. Ride-hailing service Didi (Chinese Uber) is exclusively EVs. This has largely made air pollution from vehicle emission a chapter in the history book! Tesla vehicles are visible but not as ubiquitous as here in the US. These Chinese-made EVs have a clear competitive advantage in terms of cost. Many of them sell for under $20,000 with government incentives and are gaining traction in markets such as Europe and Australia. I believe the differentiating factors will be replacement costs (batteries), software capabilities, peripheral and connected services (charging network), and market dominance (both domestic and abroad).
