Trump’s ideal Treasury pick: squarer of circles
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Gabriel Rubin
WASHINGTON, Nov 18 (Reuters Breakingviews) -U.S. President-elect Donald Trump likes to say that his staff picks look like they’re straight out of central casting. For investors, his policy choices are anything but. Despite boasting that his prospective victory juiced stocks, his mania for tariffs is anathema to Wall Street orthodoxy. That puts a spotlight on the struggle over who he will pick as Treasury secretary: markets could use an ambassador in the Trump administration as much as Trump could use a trusted voice to calm them. Ultimately, though, it’s a job to reconcile the irreconcilable.
Judging by prediction market Polymarket, the frontrunner for months was hedge-fund manager and campaign adviser Scott Bessent. But transition team head and Cantor Fitzgerald CEO Howard Lutnick is interested, too, and received public support from key ally and Tesla boss Elon Musk. Some Trump-friendly financiers back Bessent – like Third Point’s Dan Loeb, who warned that the nominee will set the tone for the administration’s entire economic policy, making it more consequential than usual.
Trump has broadened his search to include boss of buyout shop Apollo Global Management Marc Rowan, former U.S. Trade Representative Robert Lighthizer, and former Federal Reserve Governor Kevin Warsh, the Wall Street Journal reported. Whoever wins has a tough act to follow. Between stock-moving tweets and fiercely protectionist policy, Trump is an unusually chaotic figure. Yet Steven Mnuchin, Treasury secretary during his first term, maintained close relationships with Wall Street and guided the administration’s corporate-friendly tax overhaul. The S&P 500 Index .SPX climbed roughly 70% over Trump’s first four years, outpacing President Barack Obama's second term and President Joe Biden's tenure thus far.
The job will be even tougher now. Plans to adopt across-the-board 10% to 20% tariffs, rising to perhaps 60% on Chinese goods, could increase inflation in 2025 by 75 basis points, Nomura analysts reckon. That’s at tension with the Federal Reserve’s push to lower interest rates, which the investment bank reckons will now be constrained.
A Treasury pick cannot undo this. At best, passing over a hardcore trade skeptic like Lighthizer could avoid spooking markets further. But long-dated bond yields have climbed around 70 basis points since the election, potentially anticipating inflationary policy. Stocks, after initial euphoria, have surrendered gains. Loeb claimed that markets tend to focus on one major risk at a time, and are currently weighing Trump’s Treasury choice. If so, that’s looking past the obvious problem: whoever the messenger, the message can only change so much.
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CONTEXT NEWS
U.S. President-elect Donald Trump and his advisors are weighing who will be nominated to lead the U.S. Treasury Department under his administration, the Wall Street Journal reported.
Trump adviser and Tesla CEO Elon Musk is advocating for Cantor Fitzgerald CEO Howard Lutnick, as opposed to hedge fund manager Scott Bessent, who is also in the running. Apollo Global Management CEO Marc Rowan, former Federal Reserve Governor Kevin Warsh, and former U.S. Trade Representative Robert Lighthizer are also under consideration, according to reports.
Bond yields climbing in anticipation of Trump https://reut.rs/40N1fst
Editing by Jonathan Guilford and Pranav Kiran
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