Jim Cramer's Take: The “One Big Beautiful Bill Act” Could Be a Fiscal Time Bomb for Investors

The “One Big Beautiful Bill Act” (H.R. 1) has just passed the House, but let me tell you—this legislation isn't all roses for investors. With its $2.8 trillion deficit boost and a projected 124% debt-to-GDP ratio by 2034, this bill could reshape markets in ways that favor some sectors while threatening others. Here's what you need to know—and how to position your portfolio.

The Fiscal Tsunami: Why Deficits Matter to Investors

The Congressional Budget Office (CBO) analysis makes it clear: H.R. 1 is a fiscal grenade. By slashing taxes for businesses and high-income households while boosting defense and border spending, it's set to balloon the deficit by $2.8 trillion over a decade. That's not just a number—it's a signal that Treasury yields are about to get a jolt.

The CBO projects 10-year Treasury rates could rise by 14 basis points on average due to higher borrowing costs and a tighter labor market. That's bad news for bondholders, but great news for banks like JPMorgan (JPM) or Citigroup (C), which profit from wider interest rate spreads.

Inflation? The Bill's Impact Is a Mirage—For Now

While the bill's tax cuts and spending might temporarily nudge inflation up 0.12% by 2027, the long-term effect is negligible. But here's the catch: the market could overreact. Investors might bid up inflation-linked assets like TIPS or gold (GLD) in anticipation of rising prices—even if the actual data doesn't support it.

Meanwhile, sectors like energy (XLE) or defense contractors (like Lockheed Martin (LMT) or Raytheon (RTX)) could see a direct boost from the bill's $144 billion defense spending. The border wall alone? A $49.7 billion cash cow for construction firms.

The Sectors to Watch—and Worry About

• Winners: Financials, defense, and energy.
• Banks: Higher rates mean fatter profits.
• Defense: $144 billion in modernization and border security? That's a gold mine for contractors.

• Energy: Tax breaks for oil and gas (and a repeal of EV incentives) could supercharge firms like Exxon (XOM) or Chevron (CVX).

• Losers: Rate-sensitive sectors like utilities (XLU), real estate (XLRE), and consumer staples (XLP).

• Higher borrowing costs could crimp earnings for companies reliant on low rates.

The Senate Could Still Derail This Train

Don't forget: the bill hasn't cleared the Senate yet. The GOP's competing tax plan (introduced June 16) is smaller in scope but still risky. If lawmakers compromise, the final bill's deficit impact could shrink—but don't count on it.

Jim's Bottom Line: Play the Spread, Not the Deficit

Here's what to do:
1. Short Treasuries, Buy Financials: Sell long-dated bonds (TLT) and buy JPM or Bank of America (BAC).
2. Dip into Defense Stocks: Lock in gains on LMT or RTX before the Senate debates begin.
3. Hedge with Inflation Tools: Buy TIPS (TIP) or gold (GLD) to guard against rate volatility.
4. Avoid Rate-Sensitive Stocks: Utilities and real estate ETFs are sitting ducks if yields spike further.

The “One Big Beautiful Bill” might look good on paper, but for investors, it's a double-edged sword. Keep your eyes on the Senate—and keep your powder dry until we see how this fiscal monster evolves.

Stay tuned—markets don't wait for clarity!