Lower yields and a softer Dollar set to brighten Asian markets on Tuesday

The trading week launched with robust enthusiasm, sparked by the appointment of Scott Bessent as the U.S. Treasury Secretary. Known for his formidable presence in global finance and his practical, not ideological, approach, Bessent harmonizes well with President-elect Trump's aggressive tariff and tax policies—albeit with a critical caveat. His reputation for pragmatic decision-making has ignited optimism on Wall Street, propelling a belief that he will prioritize economic strength and stability over narrow political gains. This positivity wave is now permeating global financial markets, instilling a bullish sense of confidence across various economic landscapes.

Bessent's strategic induction has lubricated the financial market's main mechanisms, leading to a marked descent in Treasury yields that have energized economic and market valuations. This relaxation in borrowing costs has supercharged parts of the markets, particularly catalyzing a more than 2% surge in the Russell 2000 index to new zeniths. This rally underscores a rejuvenated faith that Trump’s forthcoming policies under Bessent’s guidance will significantly benefit smaller, domestically-centered enterprises.

As we progress into this week's pivotal segments, the focus sharply turns to the impending U.S. economic data, poised to validate whether the economic undercurrents can sustain this newly invigorated market sentiment characterized by dipping yields, a relaxed dollar, and an exuberant outlook. This period could be the litmus test, determining the rally’s durability and potential to ascend further.

On the eve of Wednesday's crucial release of personal income and PCE inflation figures, the financial spheres are abuzz with anticipation for the November FOMC minutes, eager to decrypt any subtle nods to how the recent electoral verdicts might influence the Fed's tactical foresight. Although it may be premature for the Fed to adjust its strategies based on speculative future events, these minutes are expected to crack open discussions on the potential economic tremors from Trump’s aggressive trade policies slated for 2025. Maintaining its classic conservatism, the Fed will likely adhere to a 'wait and watch' doctrine, eschewing radical shifts until more concrete economic patterns unfold.

With Bessent poised to steer the Treasury, there’s elevated anticipation for a seamless interplay between fiscal and monetary strategies, potentially mirroring the synergistic Powell-Yellen dynamic. Such strategic fiscal-monetary alignment could set the stage for further rate reductions, assuming inflation remains benign.

Bessent’s appointment has smoothed the ruffled bond market seas, prompting yields to dip and softening the dollar—a narrative shift likely to cast a favourable glow on Asian markets on Tuesday. His advocacy for reduced deficits has signalled a retreat for bond vigilantes, suggesting a more measured fiscal course that might recalibrate market dynamics.

This collective global market exhales, viewing Bessent as a potential buffer against Trump's more zealous fiscal measures and ultimately softening of harsh tariffs. This echoes a sentiment of relief and strategic optimism across investment territories in ASEAN and Europe.

Moreover, emerging signs of détente between Israel and Hezbollah contribute to the brightening economic horizon, as evidenced by the easing of oil prices, adding another layer of positive market sentiment. This evolving geopolitical landscape and strategic fiscal appointments suggest a dynamic interplay of forces shaping the global economic narrative as we edge closer to 2025.

As we gaze towards the year-end, the markets seem primed to maintain their bullish momentum, assuming the Federal Reserve continues its current trajectory without a pause in December. This steadfast advance sets the stage for investors to preemptively embrace the potential prosperity of 2025, buoyed by solid economic growth and earnings. Further bolstering this optimistic outlook is the anticipated easing of inflationary pressures, mainly through a welcome decline in oil prices, poised to inject additional vitality into the economic landscape. This confluence of factors presents a compelling case for a holiday rally.