Trump Picks Scott Bessent as Treasury Secretary, What Does It Mean for the Financial Markets?

Trump said Friday that he had chosen Scott Bessent for Treasury secretary, turning to the hedge fund executive to serve in a post with oversight of the massive US government debt market, tax collection and economic sanctions.

Bessent has advocated for cutting taxes and reducing government spending and regulations. Bessent would also focus on enacting tariff, slaying inflation and maintaining the U.S. dollar as the Reserve Currency of the World. How will Bescent's policy views impact the financial markets?

Bessent will prioritize delivering on election tax cut pledges, which would include making Trump's first term tax cuts permanent, as well as eliminating taxes on tips, social-security benefits and overtime pay. Bescent has also advocated for deregulations, particularly to spur more bank lending and energy production, as noted in a recent opinion piece he wrote for The Wall Street Journal.

The market's surge after Trump's election victory, he wrote, signaled investor expectations of "higher growth, lower volatility and inflation, and a revitalized economy for all Americans."

In January this year, Bessent predicted a “Trump Rally” in stocks as long as the Republican remained ahead in the election polls. “We are expecting an upward trajectory in the U.S. equity markets,” he wrote in the letter to Key Square clients. “Barring (President Joe) Biden pulling ahead in substantial fashion, all pullbacks should be bought.”

Bessent advocates for reducing the deficit. He has in media interviews spoken about the need to tackle the nation’s debt. “I do think this debt and deficit is going to be the big issue of the day. I think Americans are worried about it.” He argues that consumer prices can be brought down “by starting with a deficit reduction program.”

Bessent said he would urge Trump to “make public his desire to get the deficit down to 3% [of U.S. gross domestic product] by the end of his term. They averaged 4% under Trump's first term, so get that down to 3%.”

Bessent has been a strong proponent of Trump’s embrace of the crypto industry. Such support would make him the first treasury secretary to openly champion cryptocurrency, sending a clear signal that Trump is serious about establishing the US as the "crypto capital of the planet".

In an interview with Fox Business earlier this year, he said, “Crypto is about freedom and the crypto economy is here to stay. Crypto is bringing in young people, people who have not participated in markets.”

His advocacy extends beyond rhetoric. Bessent has invested in blockchain startups and decentralized finance (DeFi) initiatives, signaling his confidence in the sector’s long-term potential.

Additionally, Bessent's stance on maintaining the U.S. dollar as the world's reserve currency will likely strengthen the U.S. dollar, while oil prices may decrease. Bessent supports increasing U.S. energy production. “3 million more oil barrels flowing a day from U.S. energy production,” Bessent told the audience at the conference in Washington, D.C., adding that there would be a substantial decrease in the price of oil, which he said is “one of the No. 1 drivers of inflation expectations.”

Source: MarketWatch, Bloomberg, WSJ