Tariff checks and lower taxes are priced in the markets

Wall Street has now priced in some of the net effects of White House policies that have yet to take shape, from lower taxes to potential stimulus checks.Why it matters: That leaves less potential upside for stocks when those policies actually materialize.Driving the news: President Trump touted $2,000 stimulus checks paid for via tariff revenue over the weekend, though the details are far from certain.Higher-income consumers can largely expect lower taxes in 2026 as a result of the One Big Beautiful Bill, while middle- and lower-income households are likely to see more modest relief.The law also allows business to expense their research and development costs, which could also be stimulative as it leads to increased spending.What they're saying: The impact of upcoming policy is likely already priced in "based on markets being forward looking and thinking about expectations for the future," Kevin Gordon, head of macro research and strategy at Charles Schwab, tells Axios.Strategists on Wall Street have been touting the effects of the One Big Beautiful Bill on stocks since its passing this summer. That could leave little room for upside when reality catches up to those expectations.Reality check: The market runs on expectations, but it also runs on earnings, and if consumers can spend more after a windfall from policy stimulus, then earnings should grow."I've got this bet on the consumer" with the One Big Beautiful Bill, "which is going to allow for higher deductions and therefore bigger tax refunds for much of the middle-income people who do a lot of the consuming," says Jim Caron, chief investment officer at Morgan Stanley.Zoom in: That suggests that perhaps the market has not fully priced in the reality of potential $2,000 stimulus checks."I would be very surprised if it is in base cases yet, because we simply just don't know" what will happen with these checks, Michael Metcalfe, senior economist at State Street, says.If those stimulus checks are doled out, and they lead to more inflation, "this is not my forecast, but never say never, you cannot rule out rate hikes," Gordon of Schwab says.If market participants thought the stimulus checks were more certain, there would likely be a negative reaction, since much stronger stimulus could mean the Federal Reserve has to hesitate more, Metcalfe says.The bottom line: When the future is already priced in the market, the risks are higher if it fails to come true.