The “Bessent Bounce” didn’t last long. Just one day after markets cheered Trump’s pick for Treasury secretary as a Wall Street-friendly choice, someone that might even tame the threats of harsh tariffs — the incoming president reminded everyone who the boss is.
Trump cast the tariffs as necessary to clamp down on migrants and illegal drugs flowing across borders, and the market reaction was swift. The Canadian dollar dropped to a four-year low. The Mexican peso sank to its weakest since 2022.
While US trading was more restrained and Europe was left off the hook for now, it’s still a warning sign for anyone who rushed into the market’s riskiest fringes. “No profit, no problem” has been the mantra for traders who bid up a basket of loss-making technology stocks by almost 14% over six sessions, the most since February 2023.
“The impact from the Bessent appointment was overestimated by traders,” said Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo. “Even if Bessent tries to handle the deficit, Trump in the end has ultimate power to impact the US’ fiscal situation — it’ll be a volatile four years for global assets.”
To Andrew Slimmon, a portfolio manager at Morgan Stanley’s investment management arm, the gambling spirits that have been on display reflect, in part, what typically happens in the “honeymoon period” following the election of a new president.
“Once they start to put pen to paper and you realize that not everything is perfect,” Slimmon told Bloomberg TV. “That’s when the market tends to pull back.”—Lu Wang