Scott Bessent, founder and chief executive officer of Key Square Group LP, during an interview in Washington, DC, US, on Friday, June 7, 2024.
Stefani Reynolds | Bloomberg | Getty Images
The U.S. stock market appeared to cheer President-elect Donald Trump’s presumptive nominee for Treasury secretary, who told CNBC earlier this month that he sees an era of strong growth and lower inflation ahead.
Stock market futures rose and Treasury yields tumbled early Monday following the announcement late Friday that Trump would pick Scott Bessent, a familiar Wall Street figure, to take on his administration’s most important economic role.
The move sent a message that Trump wants someone with strong market credentials as well as a similar philosophy for the role.
“This pick should please markets given Bessent’s in-depth understanding of financial markets and the economy – in particular the bond market the Trump administration will need to keep on [its] side if it is to advance its agenda successfully,” Sarah Bianchi, chief strategist of international political affairs and public policy and other colleagues at Evercore ISI wrote in a note.
Bianchi added that markets “couldn’t have done much better” than Bessent.
Since Trump’s victory earlier this month, in which he also carried a red wave that flipped the Senate to Republicans and retained GOP control of the House, markets have been mostly positive albeit volatile. In particular, bond yields have scaled higher, with some interpreting the move as anticipating another leg up for inflation while others see it as traders pricing in stronger growth.
10-year Treasury
In a CNBC interview the day after Trump’s victory, and before the announcement that he would be nominated, Bessent said he expected the new president’s agenda to help bring down inflation while simultaneously stimulating growth.
“The one thing he doesn’t want is a replay of what we’ve just got under Biden-Harris,” Bessent said.
“President Trump has some very good ideas, but I guarantee you, the last thing he wants is to cause inflation,” he added. “I don’t think the bond market is worried about Trump 2.0 inflation. I think what you’re seeing is a healthy move geared toward a growth impetus.”
Though some investors worry that the tariffs Trump has talked about implementing could cause inflation, Bessent said he favors that they be “layered in” so as not to cause anything more than short-term adjustments.
“If you take that price adjustment coupled with all the other disinflationary things President Trump is talking about, we’re going to be at or below the 2% inflation target” that the Federal Reserve prefers, he said.
Moving in threes
Bessent favors a three-pronged approach that addresses worries over the ballooning national debt and deficits: growing the economy at a 3% rate, knocking down the budget deficit to 3% of gross domestic product — less than half where it stands now — and adding three million barrels a day in oil production.
Wall Street commentary was almost universally positive.
Perpetual market bull Tom Lee, head of research at Fundstrat Global Advisors, noted that “Bessent lends substantial economic and market credibility to the incoming cabinet.”
“In our view, this reinforces the market’s perception of a ‘Trump put’ — that is, the incoming White House wants equities to perform well,” Lee wrote.
Early indications are that Bessent, who had a long history of supporting Democratic causes before backing Trump during his first run in 2016, should face little trouble getting confirmed.
Sen. Elizabeth Warren (D-Mass.) signaled perhaps some trouble from the political left, saying in a statement over the weekend that Bessent’s “expertise is helping rich investors make more money, not cutting costs for families squeezed by corporate profiteering … I do not know if Mr. Bessent will transfer his loyalty from Wall Street investors to America’s workers, but I am willing to work with anyone to advance the interests of working families.”
However, Washington policy expert Greg Valliere, chief U.S. policy strategist at AGF Investments, said Bessent should “sail to confirmation” and would join current Sen. Marco Rubio, whom Trump intends to nominate as secretary of State, “in the moderate wing of the Cabinet, with support in both parties.”
Bessent “could play could play an important counterbalance to Commerce Secretary nominee, Howard Lutnick, as Trump pursues an aggressive trade agenda,” wrote Ed Mills, Washington policy analyst at Raymond James.
“The more President Trump’s agenda can be achieved through economic growth versus significant budget cuts, we would expect the market to view that as a positive,” Mills said.
