(Bloomberg) — Hedge fund boss Scott Besent’s nomination Friday for U.S. Treasury secretary is offering bond investors a glimpse into the incoming administration’s sweeping economic agenda after an extensive search that included several prominent contenders.
Most read from Bloomberg
The $28 trillion U.S. Treasury market was effectively closed for the week when Bessent, who runs macro hedge fund Key Square Group, was formally nominated by President-elect Donald Trump. Until trading resumes early Monday in Asia, investors and strategists are waiting for more details on Besant’s views on fiscal policy and his next steps.
Here’s what Wall Street investors and strategists are saying:
Glenn Cappello, who spent more than three decades on Wall Street’s bond trading desks, is now a managing director at Mishler Financial Group.
“Scott is a financial hawk and will certainly be generally positive for the economy and markets.”
“He wants to rein in spending. Besant wants to get the Chancellor back in line with the markets. The crux of the tariff policy under Besent is that companies may have a certain amount of time to make sure they are fueling the U.S. economy or else face tariffs, Capello said.
“It’s not the tariff philosophy that a lot of people talk about. Inflation is coming. So I think it’s going to be great for America.”
John Fagan, Director at Markets Policy Partners
Fagan, who ran the US Treasury’s Markets Oversight Group from 2014 to 2018, said Besent’s previous comments and views would change once he faced the reality of the Treasury secretary’s role. “When people are in the markets, their commentary on the markets is indelibly tinged with what their book is.”
However, “when decisions are made about issuing Treasuries, those are very important decisions and they are made with large groups of people around the table and huge amounts of data and considerations that really stem from what is stable and predictable.”
Priya Misra, Portfolio Manager at JPMorgan Asset Management
“While the Secretary of the Treasury ultimately implements the administration’s fiscal policy, I am encouraged that the person in charge is very familiar with the markets.”
“Besent has talked about a gradual approach to tariffs and has been vocal about the need to control the deficit. This suggests that Besnett wants to prevent a market reaction that would constrain the administration’s goals on trade and fiscal policy.”
“The one area where there might be some concerns is his comments on the ‘shadow Fed chairman’ but I think he recognizes that an independent central bank is the main reason why the US dollar is a reserve currency and US Treasuries are a safe haven. I think the administration might comment on monetary policy, but the Fed will remain focused on its dual mandate.
Zachary Griffiths, Head of US Investments and Macro Strategy at CreditSights
“Having a guy in a macro hedge fund sounds like a good thing for the markets — someone who understands how that side works is a good thing.”
“For me, his views on the Fed — to somehow create a lame duck — are a little concerning. I know that Bescent has since withdrawn that recommendation he made. But that’s the only thing that stands out to me.” This risk “keeps this potentially volatile event alive if they take a more unconventional approach to the relationship with the Fed.”
Andrew Brenner is head of international fixed income at NatAlliance Securities
“He was Trump’s economic advisor for a good while, and I think he understands Trump.”
“Under Besent at Treasury, and with Trump, I don’t think they would try to undermine the Fed’s independence.”
Ed Al-Husseini, strategist at Columbia Threadneedle
“I don’t expect the Chancellor of the Exchequer to have an ambitious independent agenda.”
“The Secretary of the Treasury will have three tasks. First, determine the size and scope of the fiscal response in the next recession. Second, determine the maturity structure of Treasury debt as borrowing rises next year. And third, it will likely have a voice in tax policy negotiations next year.
Gregory Faranello is head of U.S. interest rate trading and strategy for AmeriVet Securities
“The process has been long and thoughtful. Bessent is a great choice. He understands the global markets, which is critical for this role. The markets trust him.”
Most read from Bloomberg Businessweek
©2024 Bloomberg L.P