Thank Scott Bessent.
Or, if you’re a junior journo condemned to writing market wraps nobody’s going to read on Black Friday, you can just cite “month-end position squaring amid holiday-thinned trading.” (All that copy’s just boilerplate bulls-it. Smart-sounding gibberish. None of it means anything.)
However you want to go about framing it, this was the best week for bonds since the early-August growth scare.
Headed into the early close for Treasurys, 10-year US yields were down ~20bps for the week, and at 4.21%, yields were the lowest since late last month. The long-end ETF was up 3.5% for the week. Not coincidentally, the dollar saw its first weekly decline in months.
That’s the Bessent trade. Notwithstanding the first of what’s guaranteed to be a never-ending string of vitriolic threats from social media feeds belonging to “Tariff Man,” markets are convinced that Treasury under Bessent means a measured approach to the implementation of Donald Trump’s protectionist agenda. Just as importantly for bonds, markets are operating under the assumption that Bessent will be a good steward — a steady hand in stormy seas.
I have some potentially distressing news in that regard: Scott’s going to have a hard time, and it’s no secret why. Trump’s going to do whatever Trump’s going to do, and if that turns out to be at odds with what Bessent thinks is best, so much the worse for Scott. I think it’s a mistake, and not a small one, to ignore what everyone knows to be basically true: Trump doesn’t know what he’s doing, and just as importantly, he isn’t especially interested in learning.
I’m not sure what happened over the past eight years to convince a lot of folks on Wall Street that 2015’s laughing stock D-lister was somehow 2016’s economic visionary, but I can assure you he’s the same guy, just older and crazier.
It’s Black Friday, and no one’s around, so I won’t trouble you (or myself) with any sort of long-winded diatribe about the term premium and the many perils for Treasurys in the event America forgets that the “full faith and credit” pledge is meaningless without the rule of law. Instead, I’ll give you a short anecdote.
In 2014, when I lived in the city, I knew a fiftysomething Trump groupie who hailed from a state nowhere near New York. I felt awful for the guy. He couldn’t make it through a conversation without bringing up his idol, and he kept, on his person, as one might’ve kept a small picture of one’s wife and children in the days before smart phones, a folded up printout of himself posing with Trump, each of them doing the thumbs up thing. You can imagine the mean-spirited snickers he elicited when he produced that printout from his jacket pocket at luncheons and, in the evenings, at bars.
I didn’t like the guy, but he meant well, which was (and, I’m sure, still is) a lot more than you can say for most people in the Manhattan business crowd. So whenever I was out with him, I’d have to warn off the other people we were with and around, because I was afraid they’d hurt his feelings, prompting me to lose my temper, which was (and still is) a very bad thing.
The point is: It wasn’t that long ago — a mere 10 years — when being a fan of Trump’s was enough to get you publicly ridiculed by anyone wearing a suit in the city. Now, in 2024, some of those same suits (probably literally) are inclined not just to give Trump the benefit of the doubt as the most powerful man on the planet, but in fact to quote directly from “The Art Of The Deal” in making the case in strategy notes to clients.
Folks, this doesn’t have to go wrong. As I put it a week or two ago, there’s nothing chiseled into any stone tablets anywhere that says “Thou shalt not elect Donald Trump President of the United States.” But just 10 years — and two cities for me — ago, there was an unwritten rule in professional social circles that said “Thou shalt not suggest Donald Trump’s a serious person unless thou art willing to be publicly shamed as a dumbbell and a buffoon.”
One more time: Trump’s the same guy. Nothing’s changed about him. If he was a joke then, he’s a joke now. So, if it goes wrong — if anything goes wrong — don’t act surprised. Your 2014 self would’ve told you so.
If only his continued buffoonery proves to be the worst of the man (and his movement)…that would be something for which to give thanks.
As I said in 2016, we will probably be ok unless we have an emergency, then covid hit…..
The vulnerable will suffer, especially undocumented immigrants, ukraine, taiwan and lower and lower middle class Americans….
Hard to put odds on this sort of thing, but which seems more plausible: i) an unknown virus emerging from wild animal markets, or bio labs
perhaps, in a secondary city in China causing a pandemic in the US and globally, or ii) a known virus already endemic in wild birds, domestic poultry, and dairy cows that is causing widespread infections among dairy workers and being distributed commercially in raw milk causing a pandemic in the US and globally?
Strictly speaking, we don’t really know the probability of H5 mixing with human influenza in the upcoming flu season and developing both human transmission (not previously had) and human lethality (often previously had). And, as our incoming Secretary of Defense so wisely says, since you can’t see viruses, you don’t need to believe in them. Or as our next head of Health and Human Services says, skip the vaccines, drink raw milk. Let’s not forget our new NIH director, who says lock down the elderly and expose kids, let the pandemic burn out. Or, for that matter, our current CDC director, who hasn’t said much about avian influenza at all.
In other words, the H5 pandemic will be a complete surprise.
JL – why are you pushing this Chinese hoax? It’s just a common cold!
Apparently I need to be re-educated.
Laughing to the bank.
Had a conversation in a bar, me with La Croix, he with beer and a wife to be on the arm. We were talking about EV’s. She was asking me questions. Then at one point he started bullying me with statements. Farmer against engineer about electric vehicles. I an EV owner and former large projects manager in energy space.
At one point he told me that the EV would lose me money. I told him the fuels savings would pay for the car. I also said I would be happy when I went to the bank.
He was said at one point he will ‘NEVER have a battery powered tractor.’
Me, A little cocky by now, ‘ yes you will in 15 years and charge it up with solar.’
He, ’15 years, NEVER.’
Me, ‘yes you will pay through the nose for diesel for 15 years then get an electric tractor.’
He, ‘I do not trust you. I trust (The orange one) the businessman who just got elected.’
Me, ‘6 bankrupties, turned a large pile of money into a small pile of money.’ (OK I do not know how many bankruptcies the bankruptcy king had. more bluster)
He, ‘Shut up you and your electric vehicles, sit down and shut up.’
Me, I shut up and just sat there at the bar while he ordered one more and guzzled it.
As he got up to go I said ‘thank you for sharing your life with me.’ Prior to this he was telling me how to grow rice and how to watch the plants to know what to do. Not that I will ever grow rice, but he impressed me as a person who knew his business. Even if he had misplaced his loyalties.
Now I know there is the hydrogen technical debate which is based on a carrier fluid to carry hydrogen around in a cartridge from which you fuel your vehicle. However you are now dependent on a fuel supplier who is not motivated to save you money. Your alternative is to buy solar panels and a big battery from which you charge your vehicle every night with no need for a fuel supplier. Which do you think will be lower cost?
I will be laughing to the bank.
Excellent post. It’s close to something our Dear Leader might have penned!
Actuallly our dear leader, the orange one, is against all things climate resistant that was started by a political enemy. The farmer is correct.
If you were referring to Walk, as our dear leader, well yes I was copying his style. It can be a combination of informative and entertaining.
What’s the over/under on Bessent’s tenure? I say 6 months. If the homophobes don’t hound him out. chump’s “policies” will.
https://www.cfr.org/article/scott-bessent-may-rue-day-he-became-us-treasury-secretary
Jeffrey Epstein is said to have thought that Trump could not read a spreadsheet. Trump had the same person doing his business books throughout and had Munchin as secretary of treasury for the full term.
Bessent may have a little more job security than people suspect.
H-Man, the spots of a leopard never change.
Bessent told his Key Square clients early this year that, in his “differentiated” view, Trump won’t actually impose significant tariffs or pursue policies that will cause a strong dollar or higher long term rates, but will instead focus on de-regulation, lower energy prices / “energy independence”, a “US manufacturing renaissance”, extending the 2016 tax cuts, and “fixing the immigration crisis”.
Presumably he shared those views with Trump and whatever he heard did not discourage him from successfully fighting for the job.
This is, essentially, the predominant market view: most of the potentially harmful things Trump said he’ll do, he won’t actually do, and some of the potentially helpful things he said, he will actually do. A win-win, for both the one and the other hand.
Looking at various industries’ stock prices, and excluding some meme names, it seems to me that the market is not broadly discounting a major increase in tariffs, or a major trade retaliation from other countries, or a major reduction in the immigrant workforce.
No reason, presumably, for Trump to be stacking his appointees with the hardest-line trade warriors and hawkiest China hawks. Must be all coincidence.
I hope that coin lands on the right side.
Every day, it seems, the win-win market consensus has more pronouncements from Trump that it has to rationalize a way to not discount. It’s just a negotiating tactic. He’s just playing to his base. Only a tenth of that will ever happen.
There was the 25% tariffs on Mexico and Canada and an additional 10% on China unless they stop fentanyl and migrants from entering the US. Price reaction suggests the market is highly confident these tariffs will never happen.
Now there is the 100% tariffs on BRIC countries unless they cease using other than the USD for trade. I think that price reaction will probably suggest the market is similarly confident this will never happen.
It’s early days, but I don’t think I’ve ever seen a US President, not a lame duck, progress so quickly toward losing credibility on a major issue.
Is this lost on Trump? I imagine his cabinet of trade warriors will make sure it is not.
No-one wants to be seen as screaming loudly while having a little twig and a big wig. So once in office, what are the odds that Trump decides to demonstrate that his stick is big and hard? It will be interesting to see how the “you know he won’t actually do any of that” investors rationalize that.
Well put JL. His threats would have carried more weight 20 years ago. Now thanks to relentless outsourcing and offshoring by US companies in the name of maximizing hareholder returns, his threatened tariffs would more often than not damage US consumers and US corporate profits more than those foreign preditors.
Doing damage to America whilst promoting Donnie has never been a deterent in his past calculations, why now? I think now that he is either going to declare himself president for life or cannot run again, why care for what his supporter think at all. The double cross is clearly in his capability.