U.S. Political Shifts and the Impact on Market Stability: Senate Procedural Changes Accelerate Policy Outcomes and Influence Asset Valuations

The U.S. Senate's procedural reforms over the past two years have reshaped the speed and efficiency of policy outcomes, with cascading effects on market stability and asset valuations. From fiscal discipline measures to energy sector overhauls, these changes reflect a deliberate shift toward bipartisan pragmatism—and a growing sensitivity to their economic consequences.

Fiscal Reforms and Market Volatility

The Fiscal Responsibility Act of 2023 (FRA) and subsequent budgetary adjustments have recalibrated the U.S. fiscal landscape. By reinstating statutory spending limits and accelerating student loan repayment resumptions, the FRA aimed to mitigate debt ceiling crises and restore investor confidence. However, the Senate's 2025 reconciliation bill, which projects a $3.2 trillion deficit increase over a decade, has introduced new uncertainties. According to a report by the Wharton Budget Model, this deficit expansion—driven by extended tax cuts from the 2017 Tax Cuts and Jobs Act—could reduce GDP by 0.3% over 10 years and 4.6% over 30 years, while lowering average wages by 0.4% Senate-Passed Reconciliation Bill: Budget, Economic, and Distributional Effects^[1].

Market volatility has already spiked in response to these fiscal shifts. In early 2025, announcements of broad tariffs under the new administration sent the VIX (volatility index) and 10-year Treasury yields to 99th percentile levels, reflecting heightened uncertainty How Energy Stocks Performed In Q1 2025^[3]. While markets stabilized by late April, the episode underscored how fiscal and trade policy changes can trigger sharp, short-term corrections.

Energy Sector Revaluations: OBBBA and the Clean Energy Dilemma

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, has become a focal point for energy sector investors. This legislation phases out key clean energy tax credits from the Inflation Reduction Act (IRA), including production tax credits (PTCs) and investment tax credits (ITCs) for wind and solar projects. For instance, projects must now begin construction by July 4, 2026, to qualify for 60% of the original credit, with no credits available after 2028 What’s in the SPEED Act?^[4].

The OBBBA's impact is already visible in sector performance. The S&P 500 Energy sector delivered a 9.9% total return in Q1 2025, driven by integrated supermajors like TotalEnergies (+20.0%) and Chevron (+16.8%) How Energy Stocks Performed In Q1 2025^[3]. While upstream companies faced declines, refining and downstream segments thrived amid elevated oil prices. However, the OBBBA's restrictions on foreign entity of concern (FEOC) involvement and its phaseout of clean vehicle credits have dampened long-term growth prospects for renewables, shifting focus toward fossil fuels and export-oriented hydrogen markets Evaluating the OBBBA’s Energy Provisions^[2].

Infrastructure ETFs and the SPEED Act

The SPEED Act of 2025, designed to streamline infrastructure permitting by reforming NEPA, has indirect but measurable effects on infrastructure ETFs. By limiting environmental reviews to “direct and reasonably foreseeable impacts,” the bill aims to reduce project delays and lower development costs What’s in the SPEED Act?^[4]. Energy infrastructure ETFs like the Alerian MLP ETF (AMLP) and First Trust North American Energy Infrastructure Fund (EMLP) have shown resilience, with EMLP's 30-day SEC yield at 3.41% as of September 2025 What’s in the SPEED Act?^[4].

Despite rising interest rates, infrastructure ETFs have maintained valuations due to stable cash flows from midstream operations. However, the SPEED Act's success in accelerating project approvals could amplify returns for these funds, particularly if regulatory clarity reduces compliance burdens What’s in the SPEED Act?^[4].

Conclusion: Navigating a New Policy Paradigm

The Senate's procedural reforms have created a dual-edged dynamic: faster policy implementation has reduced gridlock but introduced market volatility through fiscal and sectoral shifts. For investors, the key lies in hedging against policy uncertainty while capitalizing on sector-specific opportunities. Energy stocks and infrastructure ETFs remain attractive amid resilient fundamentals, but the OBBBA's long-term drag on clean energy innovation could reshape market dynamics by the late 2030s.

As the 119th Congress convenes, the interplay between procedural efficiency and economic stability will remain a critical barometer for asset valuations.