WisdomTree: Big Beautiful Bill May Boost ETF Cash Flows

ETF investors should pay attention to an overlooked provision in President Donald Trump's "Big Beautiful Bill" that could boost cash flows for technology and biotech funds through immediate research and development expensing, according to WisdomTree Asset Management executives.

The legislation, signed July 4, allows companies to expense 100% of R&D costs immediately and look back to expense investments from 2022 to 2024, according to a July 9 WisdomTree webinar, Tariffs & the Big, Beautiful Bill: Where Are We Now? 

For ETF portfolios heavy in AI and biotech stocks, this translates to unexpected cash windfalls.

Cash Flow Catalyst

The R&D expensing change represents a key catalyst for technology-focused ETFs, as companies will likely channel increased cash flows into share buybacks and dividend increases, while simultaneous tariff policies create sector rotation opportunities across the ETF landscape, according to WisdomTree strategists.

“A lot of companies that have done a significant amount of R&D around AI, they're going to be able to have a significant amount of ‘cash flow’ that they didn't expect to have before," Sam Rines, macro strategist for model portfolios at WisdomTree Asset Management, said during the webinar. "When you give companies more cash flow, they give cash flow back to shareholders."

The dynamic particularly benefits shareholder yield ETF strategies. Jeremy Schwartz, global chief investment officer at WisdomTree Asset Management, highlighted the firm's US Value Fund (WTV), which he said focuses on shareholder yield and trades "in the sevens" compared to the S&P 500's "less than 3%" yield.

For growth-focused ETFs, the provision comes as artificial intelligence investments surge across technology sectors. Jeff Weniger, head of equity strategy at WisdomTree Asset Management, noted that biotech mergers and acquisitions activity reflects the importance of R&D-intensive businesses that populate many ETF portfolios.

Tariff Policies Create ETF Winners and Losers

Beyond R&D benefits, the legislation removes incentives for solar and wind energy sectors while creating opportunities in automation and domestic manufacturing ETF themes.

"Those are two sectors that are going to get hit somewhat significantly," Rines said about renewable energy. However, immigration policy changes could benefit automation-focused companies like Deere & Co. (DE) and Caterpillar Inc. (CAT) if labor shortages develop in agriculture and construction.

The legislation includes a $10,000 interest deduction for new cars and motorcycles assembled in the United States, potentially benefiting companies like Harley-Davidson Inc. (HOG) and General Motors Co. (GM).

These sector dynamics suggest ETF investors should consider rotation strategies as policy implementation unfolds, according to the webinar. Weniger noted that technology and energy both gained approximately 6% over the past 30 days, suggesting sector-specific policy impacts may matter more than traditional growth-value divisions.

The WisdomTree executives highlighted international opportunities in Europe and Japan, where fiscal stimulus and shareholder reform initiatives could benefit ETF strategies focused on those regions.