By John Towfighi, CNN

New York (CNN) — President Donald Trump’s signature tax and spending legislation is providing short-term clarity for Wall Street — but fueling concerns about the long-term health of the US economy, investors say.

The “One Big Beautiful Bill,” which Trump signed into law on July 4, is a positive for investors because of the certainty it provides for markets. But the bill is set to worsen the nation’s debt burden over time, according to forecasts, which could put the government’s finances and the economy on shakier grounds.

For Wall Street, the legislation is not expected to spur growth or provide much of a boost to markets. Michael Green, chief strategist at Simplify Asset Management, said the law is not stimulative like Trump’s first-term tax cuts, and coupled with tariffs, it’s not expected provide a meaningful tailwind for markets,

“There are very modest tax benefits that go into some areas, but the more important components are ultimately cutbacks in support for households that are already kind of struggling,” Green said. “This is a very regressive tax program.”

The package also includes some worries for investors because it does not address America’s accumulating debt load. The law’s passing has drawn ire from economists and deficit hawks who have warned about the debt-to-economic growth ratio and the potential for a future debt crisis.

“Markets had already priced in much of the expected fiscal and economic impact,” investors at UBS Global Wealth Management said in a July 4 note. “However, the longer-term outlook is clouded by persistent deficits.”

Short-term relief

Investors this year have been on a roller coaster ride as markets dropped amid trade uncertainty and have soared to record highs. As Congress deliberated Trump’s bill, it was another source of uncertainty.

Signing the bill into law resolved that uncertainty, Jay Hatfield, chief executive at Infrastructure Capital Advisors, said.

“We’ve still got tariff noise, but at least we don’t have to worry about something terrible happening with the tax bill,” Hatfield said. “It’s relief. It’s more like the absence of pain than it is pleasure.”

The tax cuts from Trump’s first term were set to expire at the end of the year, which would have resulted in a massive tax hike. Passing the bill, which extends those cuts, averts that scenario, Hatfield said.

The bill also raises the debt ceiling by $5 trillion, giving lawmakers relief about the impending “X date,” when the government was set to hit its borrowing limit.

For the stock market, however, there isn’t much juice in the legislation, Hatfield said.

“It’s probably slightly good for investors, but not significant,” he said. “We don’t view it as being stimulative to the economy.”

Trump during his campaign proposed lowering the corporate tax rate from 21% to 15%. That proposal did not make it into the final legislation, which held the corporate tax rate steady at 21%.

Investors at UBS said the bill’s passage provides a “modest fiscal boost for 2026,” noting other tax cuts and spending reforms “may support earnings growth at the margin.”

Long-term worries

Wall Street analysts have raised concerns this year about global investors’ appetite for holding US debt. Those nerves were exacerbated by the size of Trump’s bill.

Long-term US debt, which is usually considered the safe, risk-free corner of the market, has come under scrutiny as the legislation is set to increase federal deficits.

Higher deficits mean the government would have to issue more debt to finance its spending. An increase in the supply of government bonds coupled with a rising debt load could mean the need to offer higher rates to attract investors. Higher rates correspond to higher borrowing costs for Americans.

“We’ve been highlighting the precarious position of the US government’s indebtedness for some time now, and, if left unchecked, we view debt as the single greatest risk to the ‘special status’ of the US in financial markets,” investors at BlackRock said in a June 30 note.

Alan Auerbach, a professor of economics at UC Berkeley, said he doesn’t expect significant short-term effects on the bond market, but in the long run, he expects the debt accumulation will push interest rates higher.

“If the Fed’s independence is compromised with the appointment of a new chair, I think this will exacerbate the upward impact on longer-maturity Treasury yields,” Auerbach said.

Brian Rehling, head of global fixed income strategy at Wells Fargo Investment Institute, said he thinks Republicans lawmakers are hoping that the bill will spur growth, helping offset the rising debt burden. “That remains to be seen,” he said.

Similar to Auerbach, Rehling said he doesn’t think there will be an immediate effect on the demand for bonds. But he expects yields to rise in the long run to compensate investors for the worsening fiscal outlook.

“I don’t think this is a moment in time where the bond vigilantes come out and you see kind of explosive moves to the upside in yields,” Rehling said.

“This is going to lead to the Treasury issuing more debt to cover these expenses,” he said. “And as supply comes onto the market, you would expect, just simple supply and demand, all else equal, that rates are going to have to increase to bring that demand into the market.”

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