Bessent Downplays Stock Market Weakness Amid Rising Uncertainty

Treasury Secretary Addresses Market Volatility

Treasury Secretary Scott Bessent downplayed recent stock market weakness on Thursday, emphasizing the White House’s long-term focus despite short-term fluctuations.

“I’m not concerned about a little bit of volatility over three weeks,” Bessent stated in an interview on CNBC. The S&P 500 has declined 6% since the beginning of the month, raising concerns among investors. However, Bessent reassured that stocks remain “a safe and great investment over the long term.”

Potential Government Shutdown Poses Economic Risks

Bessent also addressed concerns regarding a potential government shutdown, warning of significant economic disruptions. When asked if a shutdown would cause economic harm, he acknowledged, “It can’t be good.” The uncertainty surrounding fiscal policy adds another layer of risk to an already volatile market.

Market Volatility Tied to Tariff Uncertainty

According to Marta Norton, chief investment strategist at Empower, the U.S. stock market is unlikely to stabilize until investors gain a clearer understanding of the economic impact of Donald Trump’s tariffs.

“I read the day-one executive order on trade — it struck me that these tariffs are permanent features, not a negotiating tactic,” Norton told Quartz. She explained that the broader effects of the tariffs are more complex than they might appear, citing the now-suspended levies on electricity imports from Ontario to the U.S.

Modest Rebound Amid Persistent Concerns

Despite recent volatility, the market saw a modest rebound following a better-than-expected Consumer Price Index (CPI) report. By 1:30 p.m. in New York, the S&P 500 was up about 0.8%, while the Dow Jones Industrial Average rose 66 points, or 0.2%. The Nasdaq led gains with a 1.6% increase, driven by strong performances from Tesla (TSLA), Nvidia (NVDA), and semiconductor stocks. Intel (INTC) saw gains after reports indicated that Taiwan Semiconductor Manufacturing Company (TSMC) approached Nvidia, AMD (AMD), and Broadcom (AVGO) to establish a joint venture for operating Intel’s chip foundries.

Inflation and Tariff Implications Remain Unclear

While the ongoing trade conflict may exacerbate inflationary pressures, the full impact remains uncertain. Norton noted that while tariffs on construction materials could drive up costs, they may not necessarily lead to higher shelter prices. The ambiguity surrounding tariff consequences has led to heightened market volatility, making it difficult to determine whether the recent selloff presents a buying opportunity.

“We’re hardly in 2022 again,” Norton said. “Maybe if you’re underweight, it’s time to increase exposure, but I’m not sure I’d be doubling down otherwise.”

Investor Sentiment Versus Political Strategy

Despite market turbulence, Norton suggested that Trump may not reverse course on tariffs, given the unexpected support from certain labor unions. “It struck me that there’s a distinction between what the investment community thinks and what Trump’s audience is—investors may not be Trump’s primary concern on this issue,” Norton stated.

Conclusion: Market Uncertainty Persists

The recent market downturn highlights the growing uncertainty surrounding U.S. economic policy, particularly in relation to tariffs and a potential government shutdown. While Bessent remains optimistic about long-term investments, market strategists caution against assuming an immediate recovery. Investors should prepare for continued volatility as they assess the long-term implications of current economic policies.