OBBBA and the Economy: What Silicon Valley Investors Should Know

When the One Big Beautiful Bill Act (OBBBA) passed in July, attention naturally gravitated toward how it changes individual tax bills: deductions, brackets, and estate exemptions. But step back, and the real impact of a massive tax law like OBBBA isn’t just what it means for your 1040 today. It’s also about how it shapes the direction of the U.S. economy, markets, and corporate strategies in the years ahead.

At Summitry, our job isn’t just to help you navigate new tax codes. It’s also to anticipate how these laws ripple through investment portfolios and the broader market. Here, we offer our perspective on OBBBA’s macroeconomic effects, from growth and deficits to why markets “took it in stride,” and which kinds of companies stand to benefit most.

Short-Term Growth: A Boost from Tax Certainty

Let’s start with the fundamentals: OBBBA locks in extensions of many of the Tax Cuts and Jobs Act (TCJA) provisions, making both individual and business tax rates more predictable. Economics teaches us that clarity about what taxes will be and how long they’ll last lifts a weight of uncertainty from both households and businesses.

In the near term, OBBBA is likely to:

• Spur consumer spending by leaving more after-tax dollars in people’s pockets.
• Encourage businesses to invest more aggressively, knowing that favorable R&D and capital expenditure deductions are here to stay.
• Attract more investment into U.S. plants, equipment, and new technology infrastructure.

This is especially relevant for Silicon Valley, where faster depreciation of cloud data centers, continued R&D spending, and aggressive hiring are all on the table.

Longer-Term Realities: The Deficit Looms

However, tax cuts come at a cost. OBBBA’s provisions, especially the extended and expanded deductions and lower rates, reduce government revenue at a time when U.S. deficits are already substantial.

What are the projections?

• The current administration projects that, with OBBBA, the federal debt as a percentage of GDP will fall slightly, counting on faster economic growth to offset lower tax receipts.
• The Congressional Budget Office (CBO) offers a much more sobering outlook, forecasting that debt-to-GDP will climb to 127% by 2034, well above today’s levels, if robust growth does not materialize.

Why the discrepancy? While the Administration is optimistic about growth, the CBO is cautious, factoring in potential headwinds like rising interest costs, demographic shifts, and only incremental gains from targeted tax incentives.

What’s our take?
History shows that temporary bursts of growth from tax relief are real, but over time, deficits tend to catch up. If government borrowing continues to rise, it may eventually create more competition for private capital (the famed “crowding out” effect), pressure interest rates higher, or lead to future tax increases. Neither scenario is catastrophic for long-term investors, but both underscore the importance of owning portfolios diversified by sector, maturity, and asset class.

Market Reaction: Calm, Not Complacent

One of the striking aspects of OBBBA’s passage was the nearly muted reaction from equity and bond markets. Stocks barely budged, volatility was unchanged, and even the bond market, typically more sensitive to deficit news, remained stable through the summer.

How should we interpret this neutrality?

• Much of OBBBA’s content was expected: markets had priced in some form of TCJA extensions for months. The risk was inaction; the reward was business as usual.
• The avoidance of a “tax cliff” (with the TCJA slated to sunset) surely prevented market turbulence.
• Global investors, from pension funds to hedge funds, care most about surprises and OBBBA delivered none.

Simply put: investors weren’t worried because they saw OBBBA as a commitment to the status quo.

Corporate Planning: Accelerated R&D and Capital Spending

Perhaps the most immediate winners from OBBBA are businesses, especially those dependent on heavy R&D and infrastructure spending. For Silicon Valley giants and growth companies alike, two provisions are especially meaningful:

1. Immediate Expensing of R&D

Under OBBBA, companies can deduct R&D costs in the year they are incurred, rather than amortizing them. This accelerates the tax benefit, freeing up cash for reinvestment.

2. Bonus Depreciation on Plant and Equipment

The law continues to allow 100% depreciation on many classes of capital assets in the purchase year. For tech firms building out data centers, manufacturing lines, or distribution infrastructure, this is a sizable savings.

How is this playing out?

• Amazon, Meta, and Microsoft have each flagged these tax changes in their earnings communications, highlighting the net effect: stronger near-term cash flow, more investment into AI and cloud infrastructure, and, by extension, potentially higher earnings growth.
• Startups and smaller growth companies also win, as cash freed from tax bills can be plowed back into hiring, product R&D, and scaling operations.

Tariffs, Policy Mix, and the Bigger Picture

No tax bill lives in a vacuum. The OBBBA was crafted in the context of broader U.S. policy moves on tariffs, regulations, and energy.

• Tariffs: While tariffs tend to dampen economic activity by raising input costs, OBBBA’s growth-oriented tax strategy is designed to offset some of those downsides.
• Interest Rates: The administration aims to keep rates low, but persistent deficits could challenge that over time.
• Broader Policy: OBBBA is part of a coordinated, multi-pronged policy approach, an attempt to stimulate growth through both trade policy and domestic encouragement of investment.

As macro strategists, we see these crosscurrents at play in portfolio construction. For now, OBBBA tilts the scales toward continued corporate investment, while the longer-term fiscal implications incentivize us to remain vigilant across sectors.

For Bay Area Investors, What Does This Mean?

1. Expect near-term strength in sectors benefiting from R&D and infrastructure outlays, including technology, manufacturing, and logistics.

2. Market conditions remain constructive, but keep an eye on policy surprises, especially if deficit concerns reemerge.

3. If you own or work for a company likely to benefit from immediate expensing, the window for growth investment is wide open.

4. As always, diversify. Sticking to a tax rulebook or macro forecast too tightly could leave you exposed if the “rosy” growth scenario doesn’t fully materialize.

The Real Value of Macroeconomic Perspective

Taxes are personal, but their effects are systemic. OBBBA’s macro context is a reminder that every change in the tax code is, at heart, a change in incentives—and those incentives cascade through investment, corporate strategy, and market psychology.

As your advisors, we don’t just watch the legislation. We watch its aftermath—how companies reinvest, how markets recalibrate, and what new risks and chances emerge for Silicon Valley investors and beyond. Let us help turn this perspective into a prudent, actionable investment strategy for you and your family.

The securities identified and described do not represent all the securities purchased, sold, or recommended for clients’ accounts. The reader should not assume that an investment in the securities identified was or will be profitable. This material is intended for general informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. It does not consider the specific investment objectives, tax and financial condition or needs of any specific person. An investor should consult with their financial professional before making any investment decisions. Investing in securities involves the risk of loss.