Trump reassures markets with the appointment of a heavy weight as Treasury secretary
Media comments from Donald Trump briefly rattled the market as he appeared to double down on his tariff threats. Trump pledged on social media to impose a 25% tariff on goods from Mexico and Canada and to lift tariffs on China by “an additional 10% tariff, above any additional tariffs.” The president-elect warned that the tariffs would remain until the three nations cracked down on drugs and illegal immigrants entering the U.S.
Donald Trump was appointed this week, who by all accounts is a proper economic heavyweight, in Scott Bessent, whose CV for the role of Treasury Secretary is such that there will be few questions about his qualifications for why Trump chose him. Mr Bessent, amongst other things, was chief investment officer at Soros Fund Management and is considered an acute observer of the world economy, according to an article in the Financial Times. More importantly, he believes that tariffs are best seen as a negotiating tactic designed to extract economic policy concessions from key trading partners, which is probably what Trump wishes to achieve as his end game. It feels like a clear signal to the world he is preparing to negotiate. After a wobble earlier in the day, stocks in the US finished with modest gains; treasuries also gained on the announcement of Mr Bessent’s appointment. One can see the threat of tariffs on European stock markets, with the Stoxx 50 index down over 4% in the past month, in contrast to the S&P 500, which hit its 52nd high of the year. The week of Thanksgiving is, more often than not, a positive one for US stocks.
The Fed minutes revealed that the members still anticipate inflation returning to its 2% target at some point in the future. The final meeting of the year is on December 17th and 18th. The market still favours the Fed’s probability of cutting again by 25 basis points at that meeting; those odds have narrowed.
Later today, there is a very long list of US economic data for strategists and economists to pour over, starting with the second estimate of third-quarter GDP. No revisions to the 2.8% estimate are expected. There is employment data, and as there have been signs of a weakening labour market, giving some to suggest it is an indication of a broader slowdown in the US economy, the numbers claiming for unemployment benefit may reinforce this view, or maybe not.
The market will also focus on the PCE inflation data later in the morning. Economists have forecast a 0.2% monthly rise in the headline PCE and a 0.3% increase in the core PCE. We also get the monthly Durable Goods orders reports. Stocks in Europe look like opening essentially unchanged from last night’s close.