Trump administration's hottest star may be key to market influence

Markets are still digesting some of the changes in U.S. politics over the past few weeks. Most notably, Treasury Secretary Scott Bessant has taken a leading role as an adviser to the president.

“He’s become a big star,” Trump said Wednesday in Qatar. “Every time he’s on TV, everything goes up.”

Stocks have rallied since April as the administration has delayed or canceled punitive tariffs on imports. A former hedge fund manager with a keen eye for the markets, Bessant has been credited in many quarters for Trump’s policy shift. He could also be blamed if things don’t go as businesses, consumers and investors expect. Being a celebrity has its advantages, but it’s also fraught with risk, given Trump’s mercurial personality and the economic stakes. Bessant is everywhere these days, aggressively advancing Trump’s policy agenda and U.S. interests. He is leading sensitive tariff negotiations with China and appeared with Trump in the Middle East this past week, during which Trump promoted what he said was $2 trillion in new investments. Bessant is also expected to help Congress move forward with this year’s tax debate. So far, Bessant’s influence has been most evident in the shift on tariffs. The S&P 500 also rebounded, turning positive on May 13—the day after the U.S. cut tariffs on Chinese goods from 145% to 30% (on top of some pre-existing tariffs). Trump initially announced his tariffs on April 2, claiming to “level the playing field” for trade and highlighting a giant poster showing the high tariffs he planned to impose on all U.S. trading partners.

“That poster was a real shock,” Jens Nordvig, founder of the market data firm Exante Data, said at a recent Council on Foreign Relations meeting. “Now everyone recognizes that the poster was a mistake, and the poster has actually been taken down.”

He and many others attribute the change to the positive influence Bessant had on

Whether the market can continue to shrug off the tariffs is uncertain. The posters may be gone, but the 10% tariff on imports from almost all countries remains, while tariffs on some Chinese goods have risen to 55%.

"I don't know if the stock market has picked up on the news or if people realize that tariffs are higher now than people expected a few months ago," said Andrew Schmidt, co-chief investment officer of hedge fund Bridgewater Associates. Karen Karniol-Tambour told a Council on Foreign Relations conference. She said the market is not pricing in slower economic growth. Any new global tariffs mean pain for the domestic economy. Walmart CEO Doug McMillon put it bluntly on an earnings call Thursday: "Even if tariffs are reduced, higher tariffs will still result in higher prices." ”

Global asset manager Allianz expects inflation, as measured by the consumer price index, to reach 3.5% this summer, up from 2.3% in April. For an American that was still angry about skyrocketing egg prices last year, inflation is not moving in the direction it wants. And it is not what the Federal Reserve wants to see when considering whether to cut interest rates.

Some in the market believe that the tariff dispute and the possibility of a surge in inflation reflect Bessant's failure to fully curb the president's instinctive impulses.

leaf="">"Steven Mnuchin and Gary Cohn were willing to step up, but Bessant was not willing to do so," style="font-family:宋体">"said a prominent financial industry CEO, comparing the current Treasury secretary to the former Treasury secretary and former director of the National Economic Council during Trump's first term.

The administration's view is that the U.S. economy is in extremely bad shape at the start of Trump's new term and would have quickly fallen into crisis without Trump's intervention. What is the solution? There are multiple benefits from trade, deregulation and tax cuts, and these measures will soon show results, Bessant wrote in an opinion piece in The Wall Street Journal earlier this month.

"The American people should expect to hear the roar of the economic engine in the second half of 2025," Bessant wrote.

" leaf="">If stock market investors now hold such a view, the bond market is not so sure. Term premiums have risen in recent weeks, reflecting the higher returns traders demand for holding long-term debt amid economic uncertainty.

On Friday, Moody's downgraded the U.S. credit rating, making it the last of the three major ratings agencies to strip the country of its top Aaa rating. The 10-year Treasury yield rose to nearly 4.5% on the news, marking its third straight week of gains.

The rise in yields reflects an improving economic outlook as tariffs become less of a concern, but also concerns that Washington plans to rewrite the tax code this summer, which could add trillions of dollars to deficit spending. The Treasury will have to issue more Treasury bonds amid weak demand, which could push yields higher.

"Eventually, the market will see through the impact of this debt downgrade," said Joseph LaVorgna, managing director and chief economist at SMBC Nikko Securities and a former Trump economic adviser.

"The market has been nervous. Once people realize that the world is not going to end again as they imagined in the past few weeks, you will see some of the premiums come back down," LaVorgna said. ”

And it’s not just because Bessent has performed well in recent weeks. “To be fair, Minister Bessent has had a great performance for decades,” said Laverna. “I think he knows what he’s doing and the markets recognize and understand that. ”

Whether Trump and Bessant really had it in mind when it came to tariffs will be left for historians to debate. But it is clear that the current administration has recognized that it can only boost the economy to a limited extent and speed. If Trump and his team can continue to manage the political agenda while listening to the voice of the market, then the supporters of "Bessant Economics" may eventually be proved right.

But if they can't, then the "big star" may be blamed.