On November 22nd local time, US President elect Trump nominated billionaire Bessent, who had previously served as the Chief Investment Officer of Soros Fund Management, as the Secretary of the Treasury. After the nomination was announced, the market quickly shifted from the "Trump deal" that had lasted for some time and gradually stalled recently to the "Besant deal".
The analyst team of Rabobank wrote in a research report, "Bessent is a successful macro hedge fund manager who tends to reduce the US budget deficit to 3% of gross domestic product (GDP). He is the preferred news for the next US Treasury, increasing the possibility of some 'Trump deals' being downplayed
Besent's "3-3-3" Policy
The position of US Treasury Secretary is considered one of the "four most important positions in the US Cabinet" after the Vice President, responsible for providing advice to the President on economic and fiscal affairs and ensuring the stability of the government bond market. Trump has previously stated that among all Treasury candidates, he trusts Besson more and believes that he is better able to implement the government's new policies. "Besson is respected by everyone and is one of the most important investors and geopolitical economic strategists in the global market. He will help me lead the United States into a new golden age
Over the past weekend, in his first interview after being nominated, Benson stated that his policy focus will be on fulfilling Trump's tax reduction commitments, including making the tax cuts implemented during Trump's first term permanent and removing taxes on tips, social security benefits, and overtime pay. He also stated that he will focus on promoting tariff policies and cutting expenses, while "maintaining the position of the US dollar as the global reserve currency".
In short, his policy is "3-3-3", which means reducing the budget deficit to 3% of GDP by 2028, achieving 3% GDP growth through deregulation, and increasing production by 3 million barrels of oil or equivalent energy per day.
Specifically, in terms of economic growth, Besant advocates achieving a real economic growth target of 3% through deregulation, expanding US energy production, and controlling inflation. He emphasized that "this is done to allow the private sector to take over and replace the current inflated government spending." He added that the Biden administration's policy orientation has suppressed private investment willingness.
In terms of controlling the deficit, Besant stated that he will urge Trump to "publicly express his desire to reduce the deficit to 3% of GDP before the end of his term. Trump did not allow the deficit to reach 6% or 7% of GDP. During his first term, the federal budget deficit averaged 4% of GDP, but this term he aims to reduce it to 3%, "he said.
In the field of energy policy, Besent regards increasing crude oil production as a key means to curb inflation expectations, advocating for the daily addition of 3 million barrels of oil or equivalent energy production.
In terms of tariff policy, Besent attempted to downplay Trump's trade threat. Faced with market concerns that comprehensive tariffs could trigger a trade war and ultimately lead to higher prices for American consumers, he responded by stating that Trump's tariff threat is a negotiation strategy aimed at obtaining concessions from other countries, and that "tariffs are the starting point for negotiations with trading partners.
The market is rapidly shifting towards the 'Beisen Trading'
Based on Besson's initial statement and Trump's trust in him, the market expects that Trump's fiscal policy in the 2.0 era is expected to adopt a gradual approach and actually implement tariff policies in stages, easing the impact of Trump's more aggressive trade and economic policy proposals promised during the campaign on the market.
Greg Peters, Co Chief Investment Officer of asset management giant PGIM Fixed Income, said, "The market was previously very concerned about the emergence of more extreme candidates, and Besson has the ability, qualifications, and is considered the 'adult in the room'. The market likes him very much." Shaun Osborne, Chief Foreign Exchange Strategist of Scotiabank, said, "Besson is seen as potentially having a mitigating effect on the policies of the new US government. For example, he supports progressive tariff policies
The US dollar and cryptocurrencies immediately reversed last week's gains and turned downwards on Monday. The US dollar index, which measures the exchange rates of the US dollar against six major currencies, ended its strong rise since the end of September, falling 0.6% to 106.89, marking its largest decline in over two weeks during trading. Previously, the US dollar was the main beneficiary of the 'Trump deal', rising over 7% from early last month to last Friday. Bitcoin, which is also a major component of the "Trump deal," continued its weekend decline on Monday after hitting $100000 last week, falling below $94000 during trading. Ethereum, on the other hand, remained relatively strong, rising 3.9% at one point to over $3500, but has since followed Bitcoin's decline. The rise and fall of blockchain concept stocks vary. Bitcoin holder MSTR fell more than 4%, TeraWulf fell more than 6%, and BTC Digital fell more than 8%. Cryptocurrency exchange giant Coinbase rose about 2.5%, Beyond Inc. rose over 9.4%, and Applied Digital rose over 8.4%. Ethereum rose 6.65%.
Gold also fell due to the nomination of Besent and the news that Israel may reach a ceasefire agreement with Hezbollah in Lebanon within a few days. According to Factset data, the spot price of gold has dropped by 3.44% to $2616.80 per ounce since the nomination by Besent. Nicky Shiels, the head of metal strategy at precious metal agent MKS Pamp, said, "On the 25th, the gold price fell by about $100, and its scale and speed were as severe as the sell-off after the US election on November 6th. The potential improvement in the Middle East situation and the appointment of Besant are key factors in the gold sell-off
US bonds and stocks rose simultaneously. The S&P 500 index and the Dow Jones Industrial Average both hit historical highs during trading, and ultimately all three major stock indexes closed higher. US Treasury bonds have become the biggest winner under the "Beisen Trading". Previously, due to a series of unexpectedly strong economic data in the United States, coupled with concerns in the market that Trump's policies would trigger re inflation after his victory, the market lowered its expectations for the Federal Reserve to cut interest rates, turning the five month long rise in US Treasury bonds into two consecutive months of selling. On the 25th, the US Treasury experienced its strongest trading day in recent months. The yield of 10-year US Treasury bonds fell by 14 basis points to 4.27%, marking one of the best performances of the year. The yields of other US Treasury bonds with multiple maturities have also experienced double-digit basis point declines.
This is partly due to market expectations that Besant will follow fiscal discipline more closely, so as not to further exacerbate the US fiscal deficit. Bessent has stated that current US Treasury Secretary Yellen has excessively used Treasury bonds to provide funding for the government. On the other hand, Besent also made every effort to ease market concerns about reinflation. President Trump has some very good ideas, but I assure you that the last thing he wants to do is trigger inflation. I don't think the bond market is worried about Trump 2.0 inflation, what the market will see is healthy measures that bring more economic growth momentum. "He said in the interview," If we combine price adjustments with all the other anti inflation measures mentioned by President Trump, we will achieve the 2% inflation target that the Federal Reserve wants
Paul Donovan, Chief Economist of UBS Global Wealth Management, said that at least one important member of the cabinet opposes the continued imposition of trade taxes, which is a good thing for the market. Vincent Chaigneau, head of research at Zhongli Investment Management, believes that the nomination of Beckett indicates that Trump may not "fully" implement the most inflationary policies, including tariffs.
How will it affect the global market?
The market generally believes that Besant's nomination will support the continued rise of the US stock market. Susannah Streeter, the head of funds and markets at Hargreaves Lansdown, the largest retail trading platform in the UK, stated in a study that Trump's choice of finance minister has further inflated investor sentiment, and it seems that Wall Street will usher in a new round of stock market gains. Besent's long-term market experience has enhanced investors' confidence in the upcoming pro business policies of the new government, and raised hopes that any tariffs will be highly targeted and core inflation will remain low
Carol Schleif, Chief Investment Officer of BMO Family Office, said, "Benson's understanding of many different asset classes will help Trump maintain a very sensitive attitude towards market reactions." Tom Lee, Research Director at Fundstrat Global Advisors, told First Financial reporters, "Benson provides considerable economic and market credibility for the incoming Trump administration. This reinforces the market's view of 'Trump put options', which means the new administration wants US stocks to perform well
At the same time, unlike the previous "Trump trade" where the rise in the US stock market was concentrated in specific sectors, the market increase on the 25th expanded. The market expects that under the "Beisen Trading", the width of the US stock market will increase, and in addition to large cap stocks, small cap stocks in the US stock market are also expected to see a wave of gains. Li stated that Besent expressed support for Trump's economic agenda, which will benefit smaller, domestically oriented companies in the United States. The Russell 2000 Small and Medium Cap Index rose 1.47% on Monday, marking its sixth consecutive trading day of gains and closing at a historic high, breaking the record set in 2021.
The market also expects that Benson's nomination will continue to benefit the US Treasury market. The analyst team of Rabobank wrote in the research paper: "Besant, as a successful macro hedge fund manager, tends to reduce the US budget deficit to 3% of GDP, which clearly shows that he is not willing to adopt excessive deficit spending policies." Scott Spratt, a strategic analyst of Societe Generale and investment bank, also said: "The market's view that Besant is a 'safe choice' may lead to a rebound in US treasury bond." He also predicted that Besant advocates implementing certain policies in stages, and believes that some of the policies currently discussed are too radical, which may also provide short-term support for the Asian foreign exchange market.
However, the market believes that caution is still needed regarding the longer-term impact of the US dollar trend. For example, shortly after the US dollar fell on the 25th, according to CCTV News, on the 25th local time, US President elect Trump announced that he would impose a 25% tariff on all products from Mexico and Canada entering the United States. In addition, Trump announced an additional 10% tariff on Chinese goods. The US dollar index quickly rose 30 points in the short term, breaking through the 107 level, while non US currencies fell across the board. Among them, the US dollar rose more than 2% against the Mexican peso at one point, and the US dollar rose 1.2% against the Canadian dollar. The offshore Chinese yuan also fell by about 0.3% against the US dollar, hitting a low of 7.2722 and breaking a 4-month low. Skylar Montgomery Koning, a foreign exchange strategist at Barclays Bank, said, "Bessent's nomination once triggered a decline in the US dollar, but I believe this is only a temporary pullback after rapid fluctuations, rather than a directional change. Anyway, Trump's tariff policy is coming, which is still favorable for the US dollar
Mitsubishi UFJ Financial Group (MUFG) even suggests that the market as a whole needs to be more cautious about the "Besant deal". Although Besent has hinted in the past that a more balanced implementation of trade tariffs may be adopted, the market should not interpret this nomination too much, as the finance minister is not the one who designs the details of trade tariff implementation strategies. Under the Trump administration, the Secretary of the Treasury ultimately won't push policies, only the President can push them.