What’s on the Horizon for the New Proposed House Reconciliation Bill?
The language of a future reconciliation bill was released, but rejected for further negotiations, yet it allows us to assess its possible impact.
In U.S. legislation, reconciliation bills enable budget-related measures to pass in the Senate with a simple majority, bypassing the 60-vote filibuster threshold, crucial for advancing fiscal policies when bipartisan support is limited.
Reconciliation was used for the Tax Cuts and Jobs Act (TCJA) of 2017, which overhauled the U.S. tax code to stimulate growth by reducing tax burdens.
Before TCJA, the U.S. had high corporate tax rates and a complex individual tax code, with a corporate rate of 35% and a top individual rate of 39.6%. The TCJA aimed to boost growth, job creation, and investment, and was prioritized by Congress to fulfill campaign promises. Introduced in November 2017, it passed through reconciliation, significantly altering the U.S. tax landscape.
What the new draft means
The draft budget resolution by the House and Senate now unlocks the process to extend that bill, with a target date of July 4.
The fiscal stimulus could help partially offset some of the negative growth impacts from tariffs. We believe the stimulative portion of the bill proposed could offset two-thirds of the negative tariff impact.
It’s likely this proposed bill will increase fiscal deficits, and as a result, put upward pressure on Treasury yields in the United States. We believe concerns about the deficit are likely to alter the risk-reward profile of investing in longer-dated U.S. Treasury securities or securities with a comparable duration.
We think the latest draft of the bill may create opportunities.
Fixed income
We prefer the risk-reward at the belly (5 years) of the curve and in. This part of the curve is less affected by the trajectory of U.S. debt and macroeconomic uncertainty, and more affected by the Fed. We have confidence that the next move the Fed makes is a cut, and as a result, have more conviction in the short end of the curve.
Looking at equities
Increasing the fiscal stimulus in the United States could be a tailwind for stocks. Net interest margins and net interest income are set to inflect higher, while capital markets activity is also poised to meaningfully accelerate.
Infrastructure investment
For investors looking to avoid rate volatility, we think infrastructure can add resilience and diversification to portfolios. Infrastructure investments provide essential services with high barriers to entry and long-term contracts that include inflation escalators.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for
J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: “What’s on the horizon for the new proposed House reconciliation bill?,” by Alan Wynne, Global Investment Strategist, May 19, 2025
