Scott Bessent, the Treasury Secretary, talked about the economy, stating that tariffs haven’t harmed the market. He prefers the market’s perspective over economists’ predictions and pointed out that a lot of Vietnam’s trade is just a transfer from China. This suggests that tariffs aren’t causing inflation. He also mentioned Greer’s upcoming study on EU trade, warning countries that their rates might go back to where they were before. Regarding Japan’s election on July 20, Bessent is looking forward to the results. He noted that the UK is seen as a good trade partner and highlighted the number of jobs from state and local governments. Despite a positive jobs report, Bessent pointed out that there are ups and downs due to timing factors, like when teachers get hired or let go. He is optimistic that spending will increase after the budget bill. Bessent acknowledged there are many strong candidates for the Federal Reserve chair position and plans to discuss this in the fall. Although Bessent’s remarks didn’t present groundbreaking news, they provided valuable insights. He differentiated between market sentiment and traditional economic theories, emphasizing that real market actions matter more than theories. His view that tariffs haven’t led to inflation indicates that the causes of inflation may have changed or become more complex than standard models suggest. His note about Vietnam’s trade being linked to China shows how intertwined trade can be, making the argument that tariffs solely drive prices higher weaker. When he referenced Greer’s upcoming EU trade analysis, it hinted at a renewed focus on trans-Atlantic relations. This suggests that current interest rates might not remain stable. It’s a subtle warning that yields could return to historical levels. This could lead to more volatility in global fixed income, especially if positions lean towards a low-rate environment. Bessent also emphasized Japan’s upcoming election as an important event to watch. Once political uncertainty is resolved, any changes in fiscal or monetary policy could affect yen values and JGB yields. Currency markets may not react immediately, but any signs of post-election policy shifts could change that quickly. We are looking for indicators that might lead us to adjust investments in Japanese assets. His comment about the UK’s reputation as a trade partner was notable. It indicates that despite broader geopolitical tensions, some trade relationships are still seen as dependable. This reliability helps stabilize the value of the sterling. However, job contributions from the public sector, especially at the state and local level, can be unpredictable. Hiring and firing teachers based on the school calendar can skew payroll data. This variability means that reacting to one jobs report can lead to misunderstandings. Bessent’s optimism about increased spending after the budget bill should not be viewed as an immediate surge. These investments take time to develop, and markets might start factoring in growth prospects even before firm data comes in. It’s important to look at not just who is spending more but also when that spending will have an effect. Bessent’s belief that there are many strong candidates for the Fed chair position is another pointer for the future. With names being discussed and a timeline extending into fall, speculation might grow before it narrows. This could lead to rate-sensitive investments responding to perceived shifts in policy approach. We should keep this in mind as we move into the late third quarter. Even though Bessent didn’t make headlines with his comments, they collectively reaffirm a point: market conditions matter more than forecasts. The upcoming weeks should focus on this idea: stay less attached to macro predictions and pay more attention to where implied volatility increases. Rates, currencies, and equity positioning all connect here. It’s essential to watch for policy hints, election results, and actual spending trends rather than relying solely on consensus views.

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