It’s all about Scott Bessent in the present day. Five issues to know in regards to the incoming Treasury Sec

Market moves today are dominated by repositioning after Trump nominated Scott Bessent to lead the Treasury Department. The US dollar is weaker, Treasury yields are lower and stock futures point to new records.

Some quick thoughts:

1) One of us!

Bessent is an FX guy. His career was made as a deputy for George Soros.

2) Sigh of relief

Trump has nominated some colourful characters to various cabinet positions. Bessent is a return to the establishment and there is some irony here as many Trump supporters have long pointed to Soros as a mystery man behind the scenes pulling the strings. In any case, he’s a serious man and intricately understands the relationship between policy and markets.

3) 3:3:3

Bessent has touted a policy of 3% GDP growth, reducing the deficit to 3% of GDP and increasing US oil production by 3 million barrels per day. That’s a tall order but it’s a reasonable goal, though I’d argue that the US adding 3 mbpd would be a destabilizing error.

4) Priorities

The WSJ spoke with Bessent and he said his priorities would be:

• making Trump’s first-term tax cuts permanent
• eliminating taxes on tips, social-security benefits and overtime pay
• enacting tariffs and cutting spending will also be a focus
• as will be “maintaining the status of the dollar as the world’s reserve currency.”

Those will all be tricky. Remember, it was a Republican-dominate congress that put an expiry on the tax cuts to begin with and that was at a time of lower deficits and much lower debt. And eliminating taxes on tips sounds nice, but it’s a loophole waiting to happen. Why wouldn’t a restaurant sell food for lower prices and have mandatory ‘tips’?

5) It’s all about bonds

The real driver here is the bond market. The Treasury Dept is in charge of… Treasuries. They are the driver of all things in markets and yields are down 6-9 bps across the curve on the pick of Bessent, with the market saying he will be responsible. Falling yields are what’s driving the US dollar selloff.

I’m skeptical that this will be more than a one-day move but it does set a great tone for risk assets for the week. S&P 500 futures are up 32 points. I would certainly be wary of chasing the euro after today’s IFO data but those looking to short would be wise to wait for better levels.