Lui’s Lowdown on the Stock Market: The bond market vigilantes and Bessent are a great combination…

By John Lui - Chief Investment Strategist

The bond market vigilantes drove up yields on the 10 Year US Treasury in a few days and caused Trump to pause and de-escalate his tariff wars…

The bond market vigilantes did not like Trump’s aggressive reciprocal tariffs and sold off US Treasury bonds, causing interest rates to spike up in a few days. Higher yields on the 10 year US Treasury means higher borrowing costs for the US government and consumers.

Exit stage left Peter Navarro (The Protectionist) and enter stage right, Scott Bessent (Trump Whisperer)…

US Treasury Secretary Scott Bessent is a seasoned Wall Street professional. He understands the Bond Market Vigilantes and they understand him. Just as President Bill Clinton listened to US Treasury Secretary Rob Rubin’s advice on the Bond Market Vigilantes, Trump listened to Bessent and agreed to pause/de-escalate.

The Bessent stock market recovery…

The pause gap up led to only a partial recovery for the stock market from the post Liberation Day plunge and Bessent had more good work to do. Next came the de-escalation phase of the recovery rally for stocks after he negotiated a tariff de-escalation deal with China in Geneva.

A very important point came out from the US and China Geneva negotiations…Trump recognizes the markets like Bessent and deferred to Bessent by saying before the Geneva talks: “80% Tariffs on China seems right! Up to Scott B.”

Scott B came through big for us and we have pretty much regained all of the post Liberation Day losses in the market.

Are we out of the woods yet?…

Scott B has emerged as a clear leader in the Trump Administration and has set a path for the markets to get out of the woods, but there are still a lot of trade deals to finalize and negotiate. For new money we are cautiously optimistic and would deploy them slowly into high quality growth stocks that generate lots of free cash flow, dividend payors & growers, and turnarounds. Our existing portfolios were already positioned this way and has served us well and will continue to serve us well.

John Lui

Disclosure

Chatham Wealth Management is registered as an investment adviser with the SEC. SEC registration does not constitute an endorsement of the firm by the Commission, nor does it indicate that the adviser has attained a particular level of skill or ability.

Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be profitable for a client's portfolio.