Scott Bessent, Founder and CEO of Key Square Group LP, during an interview in Washington, DC, June 7, 2024.
Stefani Reynolds | Bloomberg | Getty Images
The U.S. stock market appeared to be cheering President-elect Donald Trump's likely candidacy for treasury secretary, who told CNBC in early November that he sees an era of strong growth and lower inflation ahead.
Stock market futures rose and Treasury yields fell early Monday after it was announced late Friday that Trump would select Scott Bessent, a well-known Wall Street figure, for the most important economic role of his administration.
The move sent the message that Trump wants someone with strong market knowledge and a similar philosophy for the role.
“This choice should please markets as Bessent has a deep understanding of financial markets and the economy – particularly the bond market, which the Trump administration must continue to manage.” [its] side if it wants to successfully advance its agenda,” Sarah Bianchi, chief strategist for international political affairs and public policy at Evercore ISI, and her colleagues wrote in a note.
Bianchi added that markets “couldn’t have done much better” than Bessent.
Markets have been mostly positive, if volatile, since Trump's victory earlier this month, in which he also sparked a red wave that flipped the Senate to Republicans and Republicans retained control of the House of Representatives. Bond yields in particular have risen, with some interpreting the move as expectations of a further rise in inflation while others see it as traders pricing in stronger growth.
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10-year Treasury Department
In a CNBC interview the day after Trump's victory and before his nomination was announced, Bessent said he expected the new president's agenda to help reduce inflation while boosting growth.
“The one thing he doesn’t want is a repeat of what we just saw under Biden-Harris,” Bessent said.
“President Trump has some very good ideas, but I guarantee you the last thing he wants to do is 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 movement focused on growth.”
Although some investors worry that the tariffs Trump has talked about imposing could lead to inflation, Bessent said he favors them being “layered” so that they cause no more than short-term adjustments.
“If you look at this price adjustment in conjunction with all the other disinflationary things that President Trump is talking about, we will be at or below the 2% inflation target” that the Federal Reserve prefers, he said.
Moving for three
Bessent favors a three-pronged approach that addresses concerns about rising government debt and deficits: grow the economy by 3%, cut the budget deficit to 3% of gross domestic product – less than half the current level – and add three million barrels per year Day in oil production.
Comments on Wall Street were almost entirely positive.
Perennial market bull Tom Lee, head of research at Fundstrat Global Advisors, noted: “Bessent brings significant economic and market credibility to the new Cabinet.”
“In our view, this reinforces the market perception of a 'Trump put' – that is, the new White House wants stocks to do well,” Lee wrote.
Early indications are that Bessent, who has long supported Democratic causes before supporting Trump in his first election campaign in 2016, should have little trouble getting confirmed.
Perhaps signaling anger from the political left, Sen. Elizabeth Warren, D-Mass., said in a statement over the weekend that Bessent's “expertise is in helping wealthy investors make more money, not in reducing costs for families.” “I don't 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 protect working people's interests Moving families forward.”
But Washington political expert Greg Valliere, chief U.S. policy strategist at AGF Investments, said Bessent should “sail to confirmation” and join current Sen. Marco Rubio, whom Trump wants to nominate as secretary of state, “in the moderate wing of the party.” Cabinet, with bipartisan support.”
Bessent “could be an important counterweight to Commerce Secretary nominee Howard Lutnick as Trump pursues an aggressive trade agenda,” wrote Ed Mills, Washington political analyst at Raymond James.
“The more President Trump's agenda can be achieved through economic growth rather than significant budget cuts, the more we would expect the market to view this positively,” Mills said.
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