Bessent to MAGA: A weak dollar powers a boom.
His January 2024 Letter to Investors Lays it all out
Weakening the dollar early in his second administration would make U.S manufacturing competitive. A weak dollar and plentiful, cheap energy could power a boom.
-Jeff Bessent January 2024
To understand Bessent’s economic worldview, we turn to his January 2024 letter to investors from his KeySquare hedge fund. Here’s what he envisions for a second Trump administration and its potential impact on markets:
1. Economic Outlook Under a Second Trump Administration
"Roaring Twenties" Revival:
Bessent expects a second Trump term to focus on economic rejuvenation over retribution. Drawing inspiration from Calvin Coolidge’s policies, Trump would aim for a period of unprecedented economic growth, seeking to cement his legacy with "the greatest four years in American history."Economist Ed Yardeni's view supports this, projecting a post-COVID boom akin to the Roaring Twenties.
Risk Factor: A sudden rise in long-end interest rates could pose a significant threat to this vision.
2. Inflation and Supply Chain Restructuring
Disinflation Ahead:
While the restructuring of global supply chains toward onshoring and security initially fueled inflation, Bessent believes this impulse has passed. Excess capacity without corresponding demand will likely depress global capital goods pricing.Forecast: Disinflation or deflation is expected to dominate moving forward.
Policy Direction:
The administration’s focus would include deregulation, energy independence, manufacturing revival, and extending tax cuts. Bessent sees widespread tariffs as unlikely, except for strategic purposes, particularly concerning China.