Financial markets showed their approval of President-elect Donald Trump’s pick for Treasury secretary, hedge fund manager Scott Bessent.
His nomination was announced after the close of US trading on Friday.
Since then, US government bond prices rose, resulting in yields softening, while the dollar surged following the announcement, with the DXY dollar index spiking to a two-year high above 108 points but is down from there this morning.
S&P 500 and Nasdaq futures were up 0.5% and 0.6% respectively.
Bessent, a hedge fund CEO, is "known to be a fiscal hawk so this should ease some of the more extreme deficit fears as he has advocated a 3% deficit by 2028", says Deutsche Bank's Jim Reid, who said "for now the market can be a bit relieved."
Bessent, founder of Key Square Capital Management after a stint as an advisor to George Soros, is seen as less extreme on trade tariffs policy than some of his rivals for the job.
He is perceived as being "a relatively conventional and safe pair of hands candidate", says AJ Bell investment director Russ Mould.
"Importantly, Bessent is seen as being less aggressive on tariffs than some of the rhetoric espoused by Trump on the campaign trail."
He was quoted in the FT suggesting Trump's tariff policy position could be changed after negotiations with various countries, and he has previously said he "would recommend that tariffs be layered in gradually".
Bessent has also spoken in favour of corporate tax cuts – solidifying a part of the new administration’s policy agenda which appeals to investors.
"This is a clear nod to Wall Street," said Kathleen Brooks at XTB, "and thus it could be a catalyst for a year end rally, which is typically a strong period for risk sentiment and stock markets".
She said Bessant was "seen as an antidote to Trump’s most extreme economic views".
Elon Musk suggested he disapproved of the appointment of Bessent, saying it would amount to "business-as-usual".
As Trump’s election pledges were expected to boost the US deficit, resulting in the post-election "Trump trade" seeing lots of US bond selling, with the 2-year Treasury yield rising 45 basis points over the past three months and the 10-year yield by 60bps.
The Commodity Futures Trading Commission reported an extension in short Treasury positions, and a record short position in five-year yields.
"US bonds have underperformed European bonds in the past three months, as the market has anticipated a surge in the deficit under a Trump presidency," said Brooks.
"Thus, we may see a reversal in the bond market sell off at the start of this week and US Treasury yields could benefit from the ‘Scott Bessant’ effect."