Scott Besant, founder and CEO of Key Square Group LP, during an interview in Washington, D.C., June 7, 2024.
Stephanie Reynolds | Bloomberg | Getty Images
The US stock market appears to be cheering on President-elect Donald Trump's presumptive nominee for Treasury Secretary, who told CNBC earlier in November that he sees an era of strong growth and low inflation ahead.
Stock market futures rose and Treasury yields fell early Monday after the announcement late Friday that Trump would select Scott Bescent, a familiar Wall Street figure, to take over the most important economic role of his administration.
The move sent a message that Trump wanted someone with strong market credentials as well as a similar philosophy for the role.
“This choice should please markets given Besant's in-depth understanding of financial markets and the economy — especially the bond market which the Trump administration will need to keep on its side if it is to successfully advance its agenda,” Sarah Bianchi, Evercore's chief strategist for international political affairs, wrote. and Public Policy and colleagues in a note.
Bianchi added that the markets “could not have done much better” than Besant.
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, if volatile. In particular, bond yields rose, with some interpreting the move as anticipating another rise in inflation while others see it as traders pricing in stronger growth.
Treasury for 10 years
In an interview with CNBC the day after Trump's victory, and before his candidacy was announced, Picent said he expected the new president's agenda to help lower inflation while simultaneously stimulating growth.
“The only thing he doesn’t want is a repeat of what just happened under Biden-Harris,” Besant said.
He added: “President Trump has some very good ideas, but I guarantee you the last thing he wants is to cause inflation.” “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 stimulating growth.”
Although some investors are concerned that the tariffs Trump has talked about implementing could cause inflation, Besant said he would prefer them to be “layered” so as not to cause anything more than short-term adjustments.
“If you take this price adjustment along with all the other deflationary things that President Trump is talking about, we will be at or below the 2% inflation target” that the Fed prefers, he said.
Move in threes
Besant favors a three-pronged approach that addresses concerns about the ballooning national debt and deficit: grow the economy at 3%, reduce the budget deficit to 3% of GDP – less than half what it is now – and add 3 million barrels a day of oil production.
Wall Street's commentary was almost universally positive.
“Bessent gives great economic and market credibility to the incoming government,” noted Tom Lee, head of research at Fundstrat Global Advisors.
“In our view, this reinforces the market’s perception of the ‘Trump plan’ — that is, that the incoming White House wants stocks to do well,” Lee wrote.
Early indications are that Besant, who had a long history of supporting Democratic causes before backing Trump during his first run in 2016, will have little trouble getting his nomination confirmed.
Sen. Elizabeth Warren, D-Mass., noted some of the problems from the political left, saying in a statement over the weekend that Bessent's “expertise helps wealthy investors make more money, not cut costs for families suffering from the pressures of corporate profiteering…No.” I know whether Mr. Besant will shift his loyalty from Wall Street investors to American workers, but I am willing to work with anyone to advance the interests of working families.
However, Washington policy expert Greg Valliere, chief US policy strategist at AGF Investments, said Bescent should “sail to confirmation” and would join incumbent Sen. Marco Rubio, whom Trump intends to nominate for secretary of state, “in the moderate wing of the Republican Party.” “. The Council of Ministers, with the support of both parties.”
Ed Mills, a Washington policy analyst at Raymond James, wrote that Picent “could play an important counterweight to Commerce Secretary nominee Howard Lutnick as Trump pursues an aggressive trade agenda.”
“The more President Trump’s agenda can be achieved through economic growth versus significant budget cuts, we expect the market will view that as positive,” Mills said.