Investors support Trump’s choice for Treasury secretary

On By Littum

Scott Bessent (center), founder and CEO of Key Square Group LP, during an interview in Washington, DC in June 2024.

Stephanie Reynolds | Bloomberg | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, wherever they are. Do you like what you see? You can subscribe here.

What you need to know today

Market rally
US stocks saw a broad rally on Monday, with major indexes hitting record highs. In contrast to Wall Street, Asia Pacific markets were mostly down on Tuesday. Japanese Nikkei 225 fell 1.38%, while Mainland China and Hong Kong markets hovered around the flat line.

Wall Street likes Bessent
Scott Bessent, President-elect Donald Trump’s pick for US Treasury secretary, has received a big thumbs up from both the stock and bond markets. Wall Street strategists heaped praise on Bessent; global analysts also believe that Trump’s election is favorable for the markets.

More taxes in more countries
Trump on Tuesday promised to raise tariffs on Chinese imports to the United States by another 10%, according to one post about Truth Social. In another postTrump said he would implement a 25% tariff on goods coming from Mexico and Canada. If that happens, Trump will end one trade agreement between all three countries.

Safe harbor appeal tarnished
Gold prices fell about 3% to $2,616.80 an ounce on Tuesday amid rising sentiment for stocks. Investors are in a risk-on mood because of Bessent’s perceived friendliness to Wall Street and reports of Israel and Hezbollah moving closer to a ceasefire.

(PRO) Global stocks are ripe for buybacks
Companies buy back shares when they want to return excess capital to investors. Although European equity markets have been “gloomy”, a focus on buyback-potential stocks has delivered “solid outperformance” over recent months, Barclays noted. For its buyback basket, the UK bank listed 10 stocks that have significant upside potential.

Bottom line

The Trump rally seems to be shifting into high gear.

This time it has been encouraged by Trump’s choice for Treasury Secretary – Scott Bessent. Investors like Bessent because, as the founder of the hedge fund Key Square Group, he brings an understanding of Wall Street to the job and presumably supports the markets.

Moreover, Bessent has indicated that he prioritizes controlling inflation even amid policies designed to support domestic growth. “I would recommend that the rates be phased in gradually,” Bessent told CNBC earlier this month before his nomination.

Unlike previous Trump rallies, where particular assets linked to Trump’s policies — bank stocks, small-cap stocks and bitcoin — reaped disproportionate gains, yesterday’s rise in markets was broad-based.

The S&P 500 rose 0.3%, in a move that saw more than 3 out of 4 stocks in the index trade higher. The Dow Jones Industrial Average climbed 0.99%, extending its streak of record highs, and Nasdaq Composite added 0.27%.

It wasn’t just big capes that were lifted by Bessent’s nomination. Small-cap stocks fared even better, likely because Bessent has expressed support for Trump’s economic agenda, which would benefit smaller, domestically oriented companies. The Russell 2000 the small- and mid-caps index rose 1.47%, its sixth consecutive positive session. It closed at a new high, surpassing the record set in 2021.

The bond market also reacted positively to the news. The yield on the 10-year government bond fell more than 14 basis points.

“You couldn’t ask for a better reception from the market,” said Quincy Krosby, chief global strategist at LPL Financial. “This is the market clapping.”

US markets will be closed on Thursday for Thanksgiving. Bessent may be one of the things that investors will be thankful for.

— CNBC’s Alex Harring and Hakyung Kim contributed to this report.