U.S. tax cut bill passes the House, more likely to trigger a correction than a summer rally in July and August.

Early this morning, the U.S. tax cut bill, officially known as the Big Beautiful Bill (BBB), finally passed the House of Representatives. After months of controversy, the only step remaining is President Trump's signature. Trump has already announced that he will sign the bill on the morning of July 4th (local time), which effectively sets the bill in motion. Now, it's time to assess the economic currents this legislation will create—especially in terms of its impact on the U.S. and Korean markets.

At its core, this bill is about fiscal expansion. The fact that the U.S. now spends more on debt interest than on national defense is no longer surprising. The federal government pays over $30 billion per day in interest. And yet, the bill raises the debt ceiling by another $5 trillion (approx. 6,770 trillion KRW). It may seem paradoxical, but the U.S. has opted to issue even more debt as its most efficient method of coping with debt. In essence, the prevailing belief in Washington is this: the best way to manage past debt is to borrow more to finance growth.

And the reason behind this aggressive fiscal maneuvering? Innovation.

America's economic dominance has always been built on innovation. The dot-com boom of the 1990s, the smartphone revolution of the 2000s, and the big tech explosion of the 2010s—each wave of innovation pushed the U.S. economy forward. And now, a new wave is forming, centered on AI, robotics, autonomous driving, and quantum computing. With BBB, the U.S. government is no longer content to wait for private capital to drive progress. It has chosen to intervene directly—mobilizing fiscal policy to accelerate strategic technologies and ensure American dominance in the next phase of global competition.

The first step toward this goal will be Treasury issuance. As early as next week, the U.S. Treasury is expected to begin issuing short-term bonds. The Treasury General Account (TGA) currently holds about $370 billion, while the reverse repo (RRP) facility has about $210 billion in reserves. The government’s target for the TGA is approximately $850 billion, meaning it will need to raise an additional $300–400 billion. These new bonds will likely be short-term T-bills, as previously indicated by Treasury Secretary Bessent. This creates two major implications.

First, liquidity will be drained. Issuing short-term bonds at this scale will pull liquidity out of money market funds and the banking system, as cash moves from the private sector into the government account. This is a classic liquidity tightening mechanism, and one that directly pressures risk assets.

Second, short-term Treasuries are high-quality collateral in the financial system, meaning they can actually serve as a foundation for future liquidity expansion. Once issued, they can be rehypothecated and used as collateral for further leverage. In short, we may see an initial liquidity drain, followed by a structural rebound.

Still, the market will feel the shock. Equity markets are already trading at stretched valuations, with PER multiples in overheated territory. Add in the looming July 9 deadline for trade negotiations, the July 30 FOMC meeting, and the low-volume, low-liquidity environment of August—and the stage is set for heightened volatility. August is historically a soft month for markets, and this year could be worse. With shrinking liquidity and no immediate policy support, the likelihood of a short-term correction increases.

How investors interpret this moment will shape their strategy. Structurally, the BBB is a clear declaration: the U.S. is choosing fiscal-driven growth over austerity. It is no longer relying solely on private capital. Instead, Washington will actively deploy government funding into next-generation industries to maintain technological supremacy. This is not just an economic strategy—it is a geopolitical imperative tied to dollar hegemony.

In this light, the market pullback should be seen as both inevitable and manageable. For investors holding sufficient cash, it may present a valuable opportunity to build risk asset exposure on weakness. Over the longer term, as government investment ramps up—likely by September or October—markets may begin a new upward cycle led by innovation sectors.

The U.S. has already chosen its direction. It has decided to abandon fiscal orthodoxy in favor of growth—growth backed by historic levels of capital deployment. Inflation will be part of the cost, but if technological innovation lifts productivity, the trade-off may be worth it. Investors must be positioned to ride this shift, not fight it. This is why, even amid volatility, we remain strategically constructive on the market.