Trump Rally Morphs Into Bessent Rally

Highlights

• Scott Bessent is the proverbial “adult in the room,” and markets like it

• Overvaluation in corporate credit is similar to equities

• Real world retailing backdrop shows that the prospect of further disinflation looks good

• Magnificent 7 are not so magnificent anymore

Key Takeaways

Bessent’s Pick Boosts Markets

• Investors are cheering on the Scott Bessent pick for Treasury Secretary – viewed as the proverbial “adult in the room.” Global stocks and bonds are staging a relief rally and the DXY dollar index is on its back foot. Bitcoin has stalled out just below the $100k mark and both gold and oil are trading lower despite the giveback in the greenback. The fact that many of the trade protectionists in the Trump camp are signaling their disappointment with the Bessent pick tells you right there that this was a decent pick up.

Stagnation Signals Economic Concern

• The most critical data-point last week was not the leading economic indicator dropping for the eighth month in a row, but rather that the index of coincident indicators stagnated at the same level for the third straight month (hasn’t happened since the fall of 2018). Zero growth in this metric over this period occurs less than 10% of the time (data back to 1959), and when it does, real GDP growth averages out to be a negligible +0.6% at an annual rate, and the median performance is +1.3%.