The Bond Vigilantes like Scott Bessent, who was nominated to be US Treasury Secretary by Donald Trump yesterday. Their vote of confidence was reflected in the 10-year US Treasury bond yield, which fell to 4.28% from 4.42% at the end of last week. We like him too. We are looking forward to having him in the Trump administration working hard to make our Roaring 2020s scenario great.
Earlier today, we were forwarded a link to a report dated January 31, 2024 written by Bessent to his partners in the Key Square Capital Management hedge fund. He endorsed our base case scenario for the rest of the decade as follows:
"Our base case is that a re-elected Donald Trump will want to create an economic lollapalooza and engineer what he will likely call 'the greatest four years in American history.' Economist Ed Yardeni believes that post-Covid America has the potential to have a boom similar to the 'Roaring Twenties' of a century ago. We believe that a returning President Trump would like this to be his legacy. In this scenario, the greatest risk factor, in our opinion, would be a sudden rise in long-end rates."
Just by coincidence, in today's Morning Briefing, we wrote: "Trump now needs to win over the Bond Vigilantes to make Trump 2.0 a success. He has proudly observed that the stock has been rising since he won the election on November 5 (chart). He should also watch the bond yield, which could impact the stock market’s valuation multiple." Bessent will likely help Trump win over the Bond Vigilantes.
