A number of events have shifted market sentiment early this week. The first is the nomination of Scott Bessent to the post of Treasury Secretary. Bessent is widely viewed as a credible bridge between Trump’s more aggressive stance on foreign trade and the traditionally tame approach to such matters. Although higher tariffs will still be pushed through, they are now expected to be imposed gradually, allowing for a more stable transition. Financial markets seemed to breathe a sigh of collective relief following the decision, leading the Dow to consecutive record highs over the past two sessions and the S&P 500 to a new all-time high on Tuesday.
The second development is an apparent ceasefire in the Middle East. The agreement between Israel and Lebanon, brokered over the last few days, took hold at 4am local time today and requires both parties to stand down for an initial period of two months.
The combined events drove a flight from Gold on Monday, causing the precious metal to fall an impressive 3.3%, or $90 per ounce. Oil prices also fell sharply, Brent Crude declining to $72 a barrel and WTI to $69. The sell-off even extended to the crypto markets, forcing Bitcoin down 5% on Monday after a failed attempt to breach $100k.
With all drama, one could be forgiven for overlooking the FOMC minutes released last night. The transcript of the meeting held on the 7th of November revealed a level of uncertainty among board members. Mixed view were expressed; the path forward not so clear. The Fed will likely maintain a wait-and-see approach and sees no reason to rush forward with further rate cuts. The central bank does in fact have a decent amount of room to manoeuvre and seems unwilling to make any rash decisions. The next rate decision is still three weeks away and current CME odds favour a 25 bps cut, although no change is still very much on the cards.
Later today, the Fed’s preferred inflation gauge will be released in the form of the PCE price index and members will no doubt pore over the data with a fine-tooth comb. US markets are closed on Thursday in observance of Thanksgiving. They will also close early on Friday.
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