In this month’s update, we assess the global market implications of the proposed US fiscal stimulus under Trump’s "One Big Beautiful Bill" and what it means for investors positioning in and into New Zealand. This edition is focused on:

Introduction: A High-Stakes Fiscal Pivot
The Policy Framework: What’s Actually in the Bill
Commentary: How the Bill May Reshape Capital Allocation
Global Macro Outlook: What We Think Happens Next
Implications for Investors in New Zealand
What This Means for Investors
Featured Listings: Strategic Entry Opportunities

1. Introduction: A High-Stakes Fiscal Pivot

Donald Trump’s proposed “One Big Beautiful Bill” is more than just campaign theatre. With H.R.1 now moving through the U.S. Senate, the world’s largest economy is edging closer to launching one of the most aggressive fiscal packages in recent history. At a time when global central banks are signalling a shift toward monetary easing, this bill risks throwing a match onto a market still catching its breath from the last inflation cycle.

The stakes are high. We are potentially entering a phase where monetary accommodation is met with simultaneous fiscal expansion, a rare and volatile policy mix. Global investors are rightly cautious. But at Fairhaven, we believe this is precisely where sharper positioning matters most.

While larger institutions may be obligated to sit on the fence, our role is different. Our value lies in interpreting policy shifts boldly, calling risks early, and identifying capital flows before they fully materialise. We see this moment not just as noise out of Washington, but as a turning point that could reshape global real estate pricing, FX positioning, and macro sentiment.

In this month’s Market Update, we cut through the noise and ask the right questions:

Could this bill create the conditions for a renewed wave of inflation globally?
Will it change how capital is allocated into yield markets like New Zealand?
And most importantly, how do investors position early, before the policy effect shows up in consensus?

2. The Policy Framework: What’s Actually in the Bill

What H.R.1 Proposes

The bill currently making its way through the U.S. Senate, formally titled H.R.1, represents the most aggressive fiscal restructuring proposed since the 1986 Reagan tax reforms. Marketed as “One Big Beautiful Bill,” it consolidates tax relief, regulatory rollback, and entitlement reform into a single legislative vehicle. At its core, the bill seeks to permanently extend the 2017 Trump-era tax cuts while adding further exemptions and deductions for targeted voter blocs, particularly working-class households, retirees, and small business owners.

Among the proposed measures are the full removal of federal income tax on overtime wages, higher standard deductions across most income brackets, and a significant expansion of allowances for tipped income and senior citizens. On the business side, the bill reintroduces 100 percent expensing for qualifying capital expenditure, allowing companies to immediately deduct the full cost of equipment, renovations, or machinery. Notably, the bill also seeks to reduce or cap federal support for welfare programs such as SNAP and Medicaid, while scaling back funding for climate-linked initiatives.

The Intended Economic Rationale

The logic from Republican lawmakers backing the bill is grounded in supply-side economics. By reducing the tax burden on both labour and investment, the administration aims to boost labour force participation, unlock private capital, and elevate productivity without relying on further monetary easing. This is particularly significant given that the Federal Reserve appears to be approaching the lower bound of its rate-cutting cycle.

The intended fiscal impact is clearly stimulative. Estimates from the CBO indicate a near-term expansion in household disposable income and corporate retained earnings, which proponents argue will feed back into stronger consumption and business investment. However, this comes at the cost of ballooning deficits. If passed in its current form, the legislation is projected to add over two and a half trillion dollars to the federal deficit over the next decade.

Early Market Reaction

In the first two weeks following the House vote, U.S. Treasury markets have reacted with visible unease. The 10-year yield jumped more than 35 basis points in a matter of days, as bond investors began repricing for a longer horizon of elevated issuance and potential inflation reacceleration. Equity markets initially responded positively, particularly in tax-sensitive sectors like retail and construction, but those gains have since moderated as rate expectations adjusted.

Currency markets have also taken notice. The U.S. dollar has strengthened notably against most G10 pairs, while the VIX index, a widely watched measure of volatility, has climbed back above 20 for the first time since February. This indicates growing investor concern over the potential macro instability the bill might introduce, especially if growth and inflation overshoot.

A Divided Fiscal Gamble

Perhaps the most notable feature of the bill is not just its content, but the political environment in which it is being advanced. The legislation has exposed deep partisan divisions, not just between Democrats and Republicans, but also within conservative ranks. While some see it as a necessary revival of American economic dynamism, others warn that the long-term costs to fiscal sustainability and creditworthiness could outweigh the short-term benefits.

Major ratings agencies, including Moody’s, have begun issuing early warnings that passage of the bill in its current form may trigger a reevaluation of U.S. sovereign credit outlooks. Elon Musk publicly criticised the bill as inflationary and structurally dangerous, a view increasingly shared by institutional fixed income desks in both New York and London.

As markets continue to digest the evolving political landscape, the passage or failure of this legislation will likely become the single most important macro variable to monitor into the second half of 2025.

3. Commentary: How the Bill May Reshape Capital Allocation

Shifting Labour Dynamics and Consumer Behaviour

One of the more immediate effects of the bill, if passed, will be behavioural. By removing federal tax from overtime pay, the proposal directly incentivises workers to log more hours, particularly in industries already facing labour shortages. This is especially relevant for sectors such as healthcare, logistics, and hospitality, where overtime is common and marginal incentives matter. Based on Fairhaven estimates, the change could lift total hours worked by two to four percent over the next 18 months.

The economic result of that is not just a larger workforce contribution, but also a material bump in household consumption. With more take-home pay, discretionary spending is likely to strengthen, supporting the very service-based businesses the bill also aims to support through tax breaks. In a consumption-led economy like the United States, these effects will not be marginal.

A Revival in SME Capital Investment

Another structural lever is the reinstatement of full capital expensing. For businesses operating on thin margins, the ability to deduct the full cost of machinery, renovations, or software in the year of purchase changes the calculus of investment. This provision is expected to be particularly potent for small to mid-sized enterprises in manufacturing, logistics, and food and beverage sectors.

We anticipate a five to seven percent increase in SME capital expenditure by mid-2026, driven not just by tax arbitrage, but by a perceived policy tailwind. For commercial landlords and industrial developers, this could translate into increased demand for flexible warehouse space, fit-out-ready retail units, and last-mile logistics hubs, especially in secondary markets.

Wealth Retention and Capital Reallocation

High-income earners in coastal states stand to benefit significantly from the proposed increase in the SALT deduction cap. This change would allow wealthy households in New York, California, and Massachusetts to retain thousands more in post-tax income annually. From a capital flow perspective, this unlocks fresh liquidity that could be reallocated into higher-yielding or more tax-efficient jurisdictions.

Fairhaven expects that a portion of this capital will flow offshore, particularly into AIP-aligned markets like New Zealand, where investors continue to seek diversification, currency hedging, and hard-asset exposure. In our view, this change is underappreciated and could contribute to a quiet rotation of private capital into secondary asset markets globally.

Construction Activity and Global Supply Chains

The deregulation push embedded within the bill includes proposals to streamline permitting for housing and infrastructure by as much as 40 percent. If implemented effectively, this could bring development timelines forward by six to nine months for federally backed projects. At a national level, this implies a three to four percent increase in annual construction output, concentrated in the southern and midwestern states.

The implications are global. As demand for inputs like steel, cement, timber, and labour rises, upstream suppliers, including those in Australia and New Zealand, may benefit from higher prices and tighter supply conditions. For investors in land banking, construction-linked equities, or early-stage development sites, these ripple effects may open valuation upside not yet priced in.

Fairhaven’s Commentary: The Underpriced Second-Order Effects

While much of the market’s focus has been on the inflationary and deficit risks of the bill, we believe the more interesting story lies in how it changes the incentives for capital deployment at the micro level. The combination of labour reform, tax relief, and deregulatory momentum has the potential to rewire investor behaviour in subtle but powerful ways.

If passed in its current form, this bill does not just stimulate the economy, it shifts the axis of capital flow. And in that shift lies opportunity, particularly for those willing to position ahead of consensus.

4. Global Macro Outlook: What We Think Happens Next

United States

Short-Term Momentum, Long-Term Risk

If the bill passes largely intact, we expect a brief acceleration in U.S. economic activity. The combination of enhanced household cash flow, SME capex incentives, and confidence effects could lift GDP by 0.3 to 0.5 percentage points in 2025 and early 2026. Consumer sentiment, already stabilising, could firm further on the back of disposable income gains and lower perceived tax burden.

However, this momentum comes with a cost. The Congressional Budget Office projects an additional US$2.4 to 2.6 trillion in deficits over the next decade. The U.S. is already running one of the highest peacetime fiscal deficits on record. At some point, bond markets will reprice this risk.

We do not expect the Federal Reserve to accelerate rate cuts as previously priced. In fact, the Fed may be forced to hold or even tighten modestly if inflation expectations start drifting upward again. The biggest risk here is what we call stagflation-lite,moderate growth with sticky inflation and elevated long-term yields.

The short-term boost may feel good, but the underlying fiscal position is deteriorating. Investors should watch the long end of the Treasury curve and implied inflation breakevens for early signals.

Global Markets

Repricing Risk Across Borders

The global reaction to this bill has already begun. U.S. Treasury yields have ticked higher, and with them, the gravitational pull of the dollar. Most major central banks are still attempting to normalise policy settings following the inflation cycle of 2022 to 2024. A sudden U.S. fiscal surge complicates that process.

Emerging markets will feel this first. Currencies such as the South African rand, Brazilian real, and Indonesian rupiah are already showing signs of renewed stress. Higher U.S. yields drain capital from EM bond markets, push up credit default swaps, and reintroduce volatility into what had been a steadily recovering asset class.

Europe and Asia, by contrast, may be more insulated but not immune. The euro and yen will likely stay weak against the dollar, reducing imported inflation but also forcing ECB and BoJ policymakers to tread carefully. If U.S. demand for commodities strengthens again, global supply chains, especially in shipping, logistics, and raw materials, could experience renewed bottlenecks.

We expect a two-phase reaction. First, a risk-on drift into U.S. assets as tax policy dominates headlines. Then, a risk-off rotation as bond markets and central banks catch up to the fiscal math.

New Zealand

Relative Stability, Hidden Advantage

New Zealand stands largely apart from these dynamics, not because it is disconnected, but because its fundamentals are less distorted. The RBNZ’s early and disciplined rate hiking cycle has bought credibility. Inflation is within target. The New Zealand dollar, while undervalued, remains stable. And most importantly, the country's real interest rate remains among the most attractive in the developed world.

From a currency perspective, a stronger U.S. dollar acts as a short-term drag on NZD. But for foreign investors, particularly those in USD or SGD, this presents a time-sensitive arbitrage. Assets priced in New Zealand dollars today are meaningfully cheaper on a global basis than they were two years ago, even after accounting for local yield compression.

On the fixed income side, New Zealand bonds may lag the global rally if U.S. yields spike again. However, this also gives the RBNZ breathing room to maintain a gradual easing stance, providing some support to the property and credit markets without sparking excessive volatility.

We expect NZD/USD to hold near 0.60 through year-end. The RBNZ will likely ease again to 3.00 percent by November, but will proceed cautiously. The biggest opportunity here is capital efficiency, global capital buying quality assets at a relative discount, with interest rate tailwinds to come.

5. Positioning in New Zealand: FX, Yield, and Sectoral Plays

Amid elevated uncertainty across U.S., European, and Asian markets, New Zealand stands out as a yield-driven safe haven. The country's economic fundamentals remain robust:

GDP Growth: Tracking at 2.0% YoY, modest but steady
Unemployment: Stable at 4.1%, indicating tight labour market conditions
Inflation: At 2.5%, well-managed within the RBNZ’s target range
Exports: Resilient across dairy, meat, forestry, education, and digital services

Currency, Rates, and Capital Efficiency

The fiscal shifts out of the U.S. are creating strong FX positioning advantages for offshore investors looking into New Zealand. The NZD remains historically undervalued, holding in the 0.60 to 0.61 range throughout Q2 2025. With the U.S. dollar strengthening in response to stimulus-led yield spikes, currency differentials are widening, creating an asymmetric opportunity for foreign capital deployment into NZD assets.

*The NZD remains below long-term averages, with room to appreciate if U.S. inflation cools and rate divergence narrows in 2026.*

Simultaneously, the RBNZ has entered an easing cycle. The latest 25bps cut in May has brought the Official Cash Rate down to 3.25 percent, with consensus projections from ANZ and Westpac suggesting a further cut to 3.00 percent by October or November.

*OCR has peaked and is projected to decline through late 2025 as inflation stabilises.*

Together, these dynamics suggest that USD- or SGD-based investors may benefit from enhanced yield-on-entry when deploying capital into leveraged NZ real estate, especially in sectors with stable cap rates and low supply risk.

Why New Zealand is Still a Safe Yield Harbour

Even as volatility picks up across the U.S. and parts of Asia, New Zealand continues to stand out for its institutional maturity and macro consistency. Inflation sits within the RBNZ’s 1 to 3 percent band, the unemployment rate is stable at 4.1 percent, and GDP growth, while modest, is steady around 2.0 percent.

More importantly, policy clarity remains intact. The RBNZ’s transparent communication and forward-guided monetary stance have allowed long-term investors to model future outcomes with greater confidence. In contrast to the political noise in many developed markets, New Zealand offers investors something increasingly scarce, predictability.

Sectoral Investment Opportunities

Several real asset categories in New Zealand offer long-term defensiveness and reliable yield:

Student Housing: Enrolments from Southeast Asia and India are recovering post-pandemic, with student visa approvals rebounding and supply-demand imbalances driving upward pressure on rents.
Aged Care Infrastructure: Driven by the ageing population and regional undersupply, aged care continues to offer inflation-linked lease structures and long-term occupancy certainty.
Logistics & Warehousing: Structural tailwinds from e-commerce, nearshoring, and supply chain digitisation are creating demand for modern warehousing and logistics hubs, particularly in regions like Hamilton, Christchurch, and Tauranga.

These sectors are well-aligned with long-term demographic, technological, and policy trends, and provide a degree of inflation protection, strong tenant covenants, and resilience against cyclical downturns.

6. What This Means for Investors

Translating Policy into Positioning

The passage of Trump’s fiscal bill is not just a U.S. event. It marks a global inflection point. For investors managing multi-market portfolios, this is a time to reassess exposure not based solely on valuation, but on how capital will flow, where yields are real, and which markets offer policy headroom.

New Zealand finds itself on the right side of many of these equations. FX-adjusted entry points are compelling. Rates are falling at a time when they may re-accelerate elsewhere. And real assets here offer a blend of income and defensiveness that is increasingly rare.

At Fairhaven, we believe the real opportunity lies in getting ahead of consensus. The market is still underpricing the second-order effects of this fiscal shift. Most institutions are constrained by compliance and reputational risk from taking bolder views. We are not. That is our edge.

Tactical Takeaways for the Next 6 to 12 Months

Lean into FX Dislocation
The NZD is undervalued relative to historical averages. A modest appreciation or even stability at current levels significantly enhances total return for offshore investors once income is converted back to home currency.
Favour Core Plus over Opportunistic Risk
With New Zealand’s rate environment turning supportive, assets with strong existing tenancy and scope for moderate uplift are likely to outperform high-risk repositioning plays that rely on leverage or major capex.
Use Rate Cycles to Drive IRR
Entry during a falling OCR environment helps lock in lower funding costs and strengthens projected returns. For investors using conservative gearing, these compounds yield without materially raising risk.
Front-run Institutional Re-entry
Many institutional investors are still in wait-and-see mode. But once stability narratives take hold in global media, competition for mid-cap real assets will rise sharply. Entering now offers both income and first-mover pricing advantage.

7. Featured Listings: Strategic Entry Opportunities

Below are several institutional-quality New Zealand assets selected for their strong fundamentals, stable tenancies, and favourable entry pricing in current market conditions.

Trump’s “One Big Beautiful Bill” Catalyst or Chaos for Global Investors?

1. Introduction: A High-Stakes Fiscal Pivot