All in all, when it comes to markets, Donald Trump picking Scott Bessent for treasury secretary is like Christmas 🎅 arriving a full month early.
Stock bulls are thrilled about his talk of tax cuts, while bond investors hope he can rein in America’s $36 trillion debt.
Bessent, founder and chief executive officer of Key Square Group hedge fund, is a big Trump ally and fundraiser but analysts reckon he could end up being a more stabilizing force in his economic team.
While his policies may not spark immediate fireworks, markets see him as a steady hand that could bring clarity to trade and fiscal policy. And let’s face it, steady isn’t a word most of us associate with a Trump White House.
So what’s all the excitement about?
- Tax Talk: Bessent is expected to roll out tax cuts, for sure, but UniCredit strategists predict “more-moderate policies” — cooling worries that inflation could get on a runaway train.
- Trumpian Tariffs: While Trump has floated imposing sweeping tariffs on friend and foe, Bessent prefers a slow burn, according to Gavekal Research’s Chief Economist Anatole Kaletsky. Trump + Bessent are likely to hike tariffs gradually and use them as negotiating tools. A more measured strategy that should soften global trade tensions without derailing markets.
- Debt Dilemma: The US national debt is up $2 trillion this year alone. Bessent’s task will be to balance fiscal stimulus with debt control—a delicate dance in an era of surging deficits. Goldman Sachs’ European trading desk said that Bessent’s fiscal approach may sweep away some fears of runaway borrowing.
But hang on, this is Trump we’re talking about
Bessent will have to act as a bridge between Trump and the Fed, now chaired by Jerome Powell. Trump hired him but relations quickly soured because Powell refused to stop the rate-hiking cycle initiated by his predecessor. If Bessent wants to go easy or go slow on tariffs, say, he may upset his boss.
Trump also has a track record of appointing sensible people and basically ignoring them, or surprising them by tweeting major policy shifts. So, if Trump 2.0 is anything like Trump 1.0, Bessent’s appointment could turn out to be a nothing-burger.
So, what’s the play?
We got you. According to Gavekal’s Kaletsky, markets haven’t fully priced in Bessent’s potential appointment, leaving room for opportunity.
- Stocks: Corporate tax cuts and deregulation are already baked into US markets, limiting upside for Wall Street. But cyclical sectors tied to slowing US growth could still see gains.
- Currencies: The dollar might see a short-term boost from confidence in Bessent’s nomination. Long term, however, currencies like the yen and renminbi could be big winners if trade fears dissipate.
For now, it’s a waiting game — but investors have plenty to watch for as the pieces finally fall into place.
