The vigorous nods of Bessent

Katie Martin (0:06)

Pushkin. For years and years, maybe a decade and a half, the most important people in financial markets were central bankers, the wise men and women who set interest rates and often also act as regulators. Today, though, they kind of play second fiddle to politicians, especially in the US. And in the US, there's two people who really matter. Three, if you include Rob Armstrong, which I don't.

The two men that matter are, first of all, of course, Mr. Donald J. Trump, but also his right-hand man in all things financial, Treasury Secretary Scott Bessent. Now, this one guy is a big reason why markets are so well behaved while policy has been so, let's say, unorthodox. And Bessent knows it. Today on the show, we're asking what the limits of that really are and whether in the long term, you really can bring MAGA to markets without causing an accident. This is Unhedged, the markets and finance podcast from the Financial Times. And Pushkin, I'm Katie Martin, a markets columnist at FT Towers in London. It's chilly out there. And I'm joined by the big fella, Rob Armstrong, off of the Unhedged newsletter on the other side of the pond over there in New York City. Rob, how do you feel about responsibility? Would you like to be like Scott Bessent, holding up the sky?

Rob Armstrong (1:35)

I am turning in somewhat hesitantly and somewhat to my surprise, to a bit of a Scott Bessent fanboy.

Katie Martin (1:46)

Are you?

Rob Armstrong (1:47)

I think the guy is in a very difficult position, as you just suggested, that requires, what is the word I'm looking for here? Flexibility. And that he seems to have fit himself to the role. And I think that nothing succeeds like success. And on the big market things I write about, it's all going okay. And what combination of skill and luck that is on Bessent's part and how much policy from the administration does or does not have to do with it, we can debate. But it's kind of working, and he's the guy whose job it is to make it work. So I'm tipping my hat. How do you like that, Katie?

Katie Martin (2:39)

You stan for Scott. Now listen, our excellent colleague James Politi interviewed Bessent for a piece in the FTV the other day. Great piece. Great piece. And there was loads of interesting stuff in there, but one line of it, which happened to be in the headline as well, really struck me between the eyes. So Bessent was talking about his critics or critics of US policy writ large, and he said, where the hell is the market risk? And critics have, quote, just been wrong. Boom. Mic drop. The guy's not wrong.

Rob Armstrong (3:16)

No. 10-year yield, the long-ish end of the Treasury curve. January 4.8-ish.

Today, 4 percent-ish.

Katie Martin (3:32)

And yields go down when prices, listeners, go?

Rob Armstrong (3:35)

What?

Katie Martin (3:35)

Up, that's correct, to the regular list. So, like, lower yields are exactly what the administration wants.

Rob Armstrong (3:42)

Wanted. And most importantly, because it means lower mortgage rates, which voters like. And they've gotten some of that. Mortgage rates are not yet low, but they are lower. And of course, where he's crowing at his critics is one of the worries was, you're going to run the economy hot, you're going to put tariffs on, there's going to be inflation, and rates are going to go up, and it's going to be awful and it has not happened. There's various reasons for that, and we can talk about what's actually happening with inflation. But I would say, exhibit one in defense of Scott Bessent and in support of Scott Bessent is the 10-year yield.

Katie Martin (4:24)

Yep. Yep.

Rob Armstrong (4:25)

Of course, live by the 10-year yield, die by the 10-year yield. So he better hope that keeps happening, and I think there's risks to it.

Katie Martin (4:34)

Yeah. So, you know, also in this interview with James, he was saying, I have a healthy regard for the market. You've got to respect the market. And I think it's reasonable to say that the administration's key measurement for that is exactly, as you say, the 10-year government bond yield. But Bessent is such a kind of curious character, right? I can't get my head around him, and that's not a reflection of our colleague, James Politi, doing a bad job on this interview. It's that there are so many contradictions packed in this one guy.

Like, the president now in the states is running like an economic policy agenda that I think it's reasonable to say in a previous life, Scott Bessent as a hedge fund manager at Soros, you know, the hedge fund group, would have been betting against. Whereas now he's like the biggest, arguably the biggest champion for it. So he has backed Trump on tariffs. He has backed Trump on trying to overhaul the Federal Reserve, partly by kicking out Lisa Cook, who's one of the governors. She's clinging on, but she's had a very rough time. He's also done like other weird, like MAGA type stuff, like saying he will use the tax service in the States, the Internal Revenue Service, to investigate left leaning organizations that he doesn't like. So on the one hand, he's like full MAGA. And on the other, he is this real kind of stabilizing factor. So seeing as you have outed yourself as a big Scott fan, Rob, like what is it he's done that you're so fond of?