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Summary

• Game On
• Pass the SALT, and More - on Taxes
• America: You're Downgraded!
• Federal Funding Cuts & Higher Ed
• Bitcoin Pizza Day
• Pride Month

Game On

In Wayne’s World, the early 1990s cult-classic movie, protagonist Wayne and his sidekick Garth play street hockey on the neighborhood thruway. Automobiles pass frequently. Wayne and Garth don’t mind.

Street hockey provides an interesting model for thinking about financial markets. The cadence of shoot-score / shoot-miss / pause / move net off the street-move net back onto the street / restart is all part of the contest.

At times there are scores (when the market goes up). Other times, there are misses (when the market goes down). And, once in a while, external factors alter the field (for example, new and confusing government policy changes).

But the game continues under all conditions and players have an easier time if they take the changes in stride and continue to move forward.

Drawing the analogy to today’s situation, we’ve just passed through a miss / pause / net off the street phase. The net is now back in the road and the play has restarted.

And what of all the concerns about tariffs?

Some of us remain gravely concerned about tariffs, and also about unconventional (and even radical) policy approaches.

But many investors seem to think that Trump learned a lesson back in April, when the rout in stocks, bonds, and the US dollar forced a suspension of much of the global tariff rollout.

The financial market consensus reached in early May was that the final tariff plan is likely to be far more modest than the initial plan revealed on “Liberation Day” in early April, which has cleared the way for a sizable stock market rally.

Also, earnings reported by large US companies for the first quarter of 2025 were generally better than feared, and recently released economic data has exceeded expectations.

Gloom was pervasive in April, but lifted a bit in May as results haven’t been so bad.

A corollary to earnings is the confidence evidenced by company managers through their willingness to continue to spend money on current projects, and plan for new projects that will support and grow their businesses.

According to information compiled by Bloomberg, most of the largest publicly-traded companies (71%) that provided guidance after Trump’s early April bombshell have decided to maintain their capital expenditure outlook.

About 8.5% of firms have increased their spending plans, while 18% have revised them lower; 3% have withdrawn guidance. These results show that business confidence largely remains intact.

Some moderation (or at least temporary reprieve) in the tariff regime, as well as business profitability holding up and business spending plans remaining mostly intact, paved the way for “Game On” in the financial markets.

The old saying “sell in May and go away” was a dud in 2025, because last month was the best performing May in a quarter century.

The chart below shows monthly stock market performance for each May going back to 1990.

Source: Bloomberg

A second old saying, “markets climb a wall of worry” is holding true for 2025. Uncertainty has been outsized, but nonetheless, most asset classes at home and abroad have now registered positive returns.

Here’s how the performance of various asset classes stacked for the month of May and thus far in 2025:

Source: Moore Financial Advisors & Morningstar

Pass the SALT, and More – on Taxes

Lawmakers are considering new bills to make several provisions of the TCJA permanent and to introduce additional modifications to tax law. The following article provides an update on new tax legislation, and presents an example of how raising the SALT cap could provide a measure of tax relief.

Tax policy is now at the top of the agenda for the US Congress.

The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant changes to the US tax code, including lowering income taxes for many. But much of the TCJA is set to expire at the end of 2025.

The House narrowly passed their version of a new tax bill, entitled “The One Big Beautiful Bill Act” on May 22. The Senate is now debating their version. Identical legislation must pass through both chambers before becoming law.

Here are some of the key provisions of the House version of the new tax law:

• Makes permanent the current 7 individual federal income tax brackets
• Bumps up standard deduction by $1,500 in 2025; and $1,000 per year in future years
• Provides an additional standard deduction of $4,000 for those over 65 until 2028; phases out for individuals earning above $75,000 and couples earning above $150,000
• Increases child tax credit to $2,500 per year for next four years
• Introduces new kind of child savings account (“Trump Savings Account”) designed to help parents save, where parents can contribute $5,000 annually in after-tax dollars until child reaches age 18
• Expands estate tax exemption to $15 million per person / $30 million per couple
• Raises cap for the State and Local Tax (SALT) deduction to $40,000 per household starting in tax year 2025 from the current $10,000

We will report more fully on the tax changes when legislation is finalized.

However, since the increase in the SALT cap, if it does pass, likely will result in more people itemizing their taxes (versus taking the standard deduction), and could yield significant tax savings, we’ve provided an example of how it may work, below.

The House bill increases the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for taxpayers earning up to $500,000. The cap and income threshold would increase by 1% annually over the next ten years under the proposed bill.

The SALT deduction allows taxpayers who itemize to deduct certain state and local taxes—such as income and property taxes—from their federal taxable income.

The $10,000 cap was introduced in 2017 under the TCJA and has been a point of contention, particularly for residents in high-tax states where state and local taxes often exceed this limit.

If enacted, this change in the SALT cap could provide substantial tax relief for taxpayers who have significant state and local tax liabilities.

Homeowners with high property taxes or individuals with substantial state income taxes could see a notable reduction in their federal taxable income, potentially lowering their overall tax burden.

As an example, let’s assume that a family with annual income of $275,000 has the following expenses:

• Property taxes: $18,000
• State income taxes: $10,000
• Mortgage interest: $8,000
• Charitable contributions: $12,000

Since their property and state income taxes are currently subject to the SALT cap of $10,000 under the current law, their deductions would total $30,000:

• SALT: $10,000
• Mortgage interest: $8,000
• Charitable contributions: $12,000

Since their total itemized deductions of $30,000 would be less than the standard deduction, they would take the standard deduction of $33,200 in 2025 (assuming no change from the current law).

If the SALT cap is increased to $40,000, this same family would be able to deduct all their property and state income tax, and they would have the following deductions:

• SALT: $28,000 ($18,000 property plus $10,000 state income tax)
• Mortgage interest: $8,000
• Charitable contributions: $12,000

This family would then be able to itemize $48,000 in deductions, giving them an additional $14,800 in deductions. If they are in the 24% tax bracket, the increased SALT cap would save them $3,552 in Federal taxes.

While the House has passed their bill, it still requires approval from the Senate, where the outcome is uncertain due to differing views on fiscal policy and tax equity.

Therefore, while the proposed changes could offer tax advantages for some, they are not yet law.

We will continue to monitor the progress of this legislation and assess its implications for your individual tax planning strategies.

America: You’re Downgraded!

Just like consumers, countries get credit scores. On Friday, May 16, the USA’s rating took it on the chin, when Moody’s said: “You’re Downgraded!”. This article puts the ratings downgrade into perspective.

Losing its status as a AAA-rated credit wasn’t a great look for our country.

Moody’s had the following to say about the US credit situation:

• Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs
• Persistent large fiscal deficits will drive the government’s debt and interest burden higher
• The US’ fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns

The US national debt is currently about $36 trillion, which is the equivalent of about $106,100 for every person in the country. And Moody’s said federal interest payments are likely to absorb around 30% of revenues by 2035, up from about 18% in 2024 and 9% in 2021.

Moody's recent action moved the US credit rating down one notch, to Aa1 from AAA.

Moody’s describes Aa1-rated debt as high quality and subject to “very low risk”, compared with its highest-quality Aaa rating, which has “minimal risk”.

The USA is now rated one notch below the top tier AAA by all three major credit rating agencies: Moody’s, Standard and Poor’s, and Fitch. These organizations provide credit ratings to bond issuers – larger companies and countries of all shapes and sizes.

S&P was the first to act on the US’ deteriorating financial situation over a decade ago: the agency downgraded the US in August 2011. Fitch downgraded the US in 2013.

The “Sovereign AAA Club”, composed of countries that hold the top tier rating, is now more rarified, with only 10 countries maintaining the gold standard: Australia, Canada, Denmark, Germany, Luxembourg, Netherlands, Norway, Singapore, Sweden, and Switzerland.

However, the downgrade isn't a death knell for America’s access to credit, or the country’s ability to borrow at relatively attractive rates. US Treasury bond and bill yields (the cost of borrowing for the US government) barely budged on the news.

As of Friday, May 30, the interest rate at which the US government borrows in large quantities, by issuing Treasury bonds and bills, was 4.4%.

Borrowing rates today for the AAA-rated countries are generally lower by about 2 percentage points, on average, than the US. However, this “yield gap” has persisted for some time.

Here’s a chart of the US 10-Year Treasury bond yield from 2006 to the present, showing how interest rates have evolved over the past two decades, with the country’s credit rating across this timeframe, noted in green and red (courtesy of DataTrek).

Source: DataTrek

It’s worth noting that long-term borrowing costs for the US were higher when all three rating agencies had the US debt rated AAA. This was in 2006 – 2007, when 10-year Treasuries often paid +5.0 percent and yields were never below 4 percent.

Fortunately, US credit rating downgrades in the past have not triggered structurally higher interest rates, recession or declining stock prices.

Even so, the Moody’s downgrade serves as a reminder that the US federal government’s debt and deficit trends are troublesome.

In a June 3 article entitled Wall Street is Sounding the Alarm on US Debt, the Wall Street Journal points to the following:

• Annual interest on the US debt is currently above $1 trillion
• The tax-and-spend legislation currently being debated in Congress would add about $3 trillion to the national debt over the next decade ($5 trillion if certain features were made permanent)
• Federal interest payments this fiscal year will be more than the defense budget; or more than Medicaid, disability insurance, and food stamps combined

It's particularly difficult for individuals who are careful and prudent when managing their own personal financial situations to imagine that such large fiscal imbalances can continue indefinitely.

As a country, we are moving closer to a point when uncomfortable actions likely will be necessary - either through significant reductions in government programs to reduce spending, or by sizable tax increases, or via some combination of spending cuts and tax hikes.

Federal Funding Cuts: Consequences for Higher Education

This article, by College Financial Planner Donna Cournoyer, discusses the consequences of the federal funding cuts for US college undergraduate and graduate students.

Sweeping federal funding cuts in 2025 under the Trump administration have deeply impacted the landscape of higher education across the United States.

Reductions in research grants, student aid, and institutional support are reshaping the undergraduate and graduate student experiences. From shrinking research opportunities to dwindling financial aid, the effects are widespread and profound.

Graduate Student Challenges

Reduction of Programs, Reduced Admissions

Some of the most severe funding cuts so far have been in the area if graduate research.

The NIH (National Institute of Health) funding is relied upon heavily by top research universities throughout the country for their advanced programs.

This research impacts both the US and global advances in medicine, science, technology, and engineering.

Regarding the consequences of reduced research funding, take Massachusetts Institute of Technology, for example.

MIT announced in May that graduate enrollment will be reduced by 8% (about 100 students) due to federal funding cuts.

Also, the House of Representatives passed a bill increasing the excise tax on college endowments from the current 1.4% to a potential of 21% for the highest endowments. This bill is now in the Senate for approval.

See President of MIT Sally Kornbluth’s letter from the Office of the President on May 20, 2025 warning of the consequences of these challenges being faced across America.

Loss of Assistantships and Research Funding

With agencies like the National Science Foundation (NSF) and the National Institutes of Health (NIH) facing budget cuts, numerous research projects have been scaled back or canceled altogether.

Many graduate students rely on federal grants for their stipends as well. Graduate students are losing opportunities and needing to shift their education paths.

This also limits some of our best and brightest students from the ability to contribute to advancements in science, engineering, and medicine.

Effects on the “Innovation Edge”

These cuts in federal research funding are pushing some students out of research altogether. Some students are considering international opportunities in countries with a more stable environment for research.

There are also some experts who have expressed a long-term fear of “brain drain,” with the potential for the US to lose its standing as a global leader in innovation and scientific excellence.

It is possible that the changes in funding may have the long term effect of dulling the edge the US has as a global leader in innovation.

Undergraduate Student Challenges

Potential Cuts to Federal Student Aid

The federal Pell Grant Program projects a $2.7 Billion shortfall for the 2025 fiscal year. This could mean cuts to the program in 2026. The federal Work Study program could also be facing cuts.

This is especially hard on students from first-generation and low-income backgrounds. With federal cuts, many schools will not be able to increase their grants to make up the loss of federal aid for these students.

This may mean some of these students will not be able to attend college at all.

Budget Cuts, Declining Campus Services, Hiring Freezes & Layoffs

The federal funding cuts are causing schools to face tough decisions on budget cuts, layoffs and hiring freezes. This impacts a broad range of services and support available to students.

Public universities are facing budget cuts that are resulting in larger class sizes, fewer course offerings and halted facilities improvements. This can hinder academic success for students.

Increased Costs & Delayed Graduation

Some students may not be able to afford full-time enrollment, and may have to extend their studies, incurring more debt and delaying graduation and employment.

Federal Policies on International Students

Proposed bans on certain categories of foreign students and visa restrictions are hindering admissions for both undergraduate and graduate programs.

Many universities rely on international students for cultural diversity and for funding, as most international students receive no aid and pay tuition in full.

Without these full-paying students, endowments and budgets will be more stressed.

The Road Ahead for Institutions

Without policy reversals and sustained federal investment, institutions are responding in a variety of ways.

Universities are looking at reallocating endowment funds, which is not always easily done, as these funds are closely linked to budgets and donors are often very specific on the use of funds given.

Some institutions are seeking additional private funding and philanthropic partnerships.

And there are a number of universities seeking policy reversals.

Conclusion

Federal funding cuts in 2025 mark a pivotal moment in American higher education.

Without restoration of federal funding, both undergraduates and graduate students are at risk of losing affordable, high-quality education and research opportunities that benefit their educational goals and their future.

Reduced federal funding also bodes ill for the future of US innovation across a variety of fields and may well have negative effects for the future path of US economic growth.

Right now, our policymakers, educators, and the public are faced with confronting the long-term risks of underfunding the very systems that cultivate the nation’s intellectual and professional capital.

Bitcoin Pizza Day

Pizza Day is recognized every year on May 22 to commemorate the first real-world transaction in which Bitcoin was used as a currency. This article highlights the most expensive pizza purchase of all time; discusses cryptocurrencies, including stablecoins; and highlight's Zeke Faux's book Number Go Up.

On May 22, 2010, Laszlo Hanyecz, a programmer from Florida, paid 10,000 Bitcoins for two pizzas, marking Bitcoin’s first commercial use.

The Bitcoin for Pizza transaction translated to $41 fifteen years ago. Today, with the price of one Bitcoin at about $111,000, the transaction would be worth about $1.1 billion. That's some dough!

Cryptocurrency captured the popular imagination in 2021 and during much of 2022, as we were emerging from the pandemic and as Bitcoin prices were surging.

But the collapse of the FTX cryptocurrency exchange in late 2022, and the unfolding of the misdeeds of the company’s CEO, Sam Bankman-Fried, served as a reminder of the speculative nature of cryptocurrency.

Investigative reporter for Bloomberg News Zeke Faux’s Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall takes a critical look at FTX and Bankman-Fried.

The FTX situation proved to be a Bernie Madoff-like Ponzi scheme, and having a refresher course on situations like this, from time to time, can keep investors grounded.

For those less interested in technicalities but curious about the personalities behind a new phenomenon, this story incorporates business, technology, and crypto counterculture narratives, along with themes of greed, hubris, and the impact of technology on finance.

While the crypto space may have fallen off the radar for many traditional investors, recent developments might be garnering some attention for the following reasons:

• The development and growth of Bitcoin ETFs
• Bitcoin reaching a new all-time high in May 2025
• Each house of Congress currently debating bills that aim to put guardrails around a branch of crypto called “stablecoins”, which may take these digital assets more into the mainstream
• The First Family’s active commercial interests in cryptocurrencies, including the stablecoin USD1

Stablecoins are digital assets designed to hold a steady value, in contrast to the price fluctuations seen in most cryptocurrencies, including Bitcoin.

Crypto enthusiasts currently use stablecoins to move US dollars into and out of the crypto ecosystem. The evolution of stablecoins holds the potential for vast sums of money to change hands without touching the formal banking system.

For those curious about following developments in the digital asset space, the House bill is The Genius Act of 2025, and the corresponding Senate bill is The STABLE Act of 2025.

In part, the new legislation, if enacted, would allow regulators to police issuers of stablecoins and apply rules to how stablecoin reserves are managed, similar to the rules that govern how banks manage their reserves.

Debate in the Senate on The STABLE Act has been contentious, because some lawmakers are questioning whether the bill goes far enough to combat the conflict of interest that USD1 might pose for the president.

Readers of Faux’s book will learn more about stablecoins and get a critical account of Tether, which is currently the world’s largest stablecoin.

Happy Pride Month!

One of our core values at Moore Financial Advisors is that we celebrate and embrace diversity, equity and inclusion.

Particularly in June, the anniversary month of the Stonewall Uprising in New York, we recognize the past and present struggles of the LBGTQ+ community.

If you choose to celebrate this month, we are with you in thought and spirit!

Best regards,

Rob, Susan, Donna & Alex