The choice of hedge fund manager Scott Bessent came after a public battle among Trump supporters over who should be the new Treasury secretary.

Trump’s Treasury Pick a Wall Street Fave

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Matt Kelley|AP-File

U.S. President-elect President Donald Trump, left, listens as investor Scott Bessent speaks on the economy, Aug. 14, 2024, in Asheville, N.C.

After some very public internal jostling, President-elect Donald Trump moved to assure Wall Street with his pick late Friday of hedge fund billionaire Scott Bessent as Treasury Secretary.

The move followed a few days in which Trump bro Elon Musk publicly argued in favor of Howard Lutnick, a co-chair of the Trump transition team and the CEO of investment firm Cantor Fitzgerald. Lutnick instead was chosen to be the new secretary of the Commerce Department, where he will have a portfolio that includes trade and tariffs, topics dear to Trump’s heart.

Markets are signaling they like the move as Dow Jones Industrial Average futures were positive by 300 points ahead of Monday’s opening in what will be a short week on account of the Thanksgiving holiday. The positive vibe follows a 426-point gain for the Dow on Friday.

Bessent is a former chief investment office of Soros Fund Management, a pedigree that might raise eyebrows among some on the right, but he has been a close Trump economic adviser and one who has made a habit of intervening in foreign currency markets. He is known to be in favor of curving the federal debt.“Scott is widely respected as one of the World’s foremost International Investors and Geopolitical and Economic Strategists,” Trump said in his announcement on Truth Social.

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Bessent campaigned with Trump during the campaign, offering full-throated support to the president-elect’s policies of deregulation, increased domestic energy output and tax cuts.

He will have his work cut out for him as the nation’s outstanding debt surpassed the $36 trillion mark on Friday – that is $16 trillion higher than when Trump entered the White House in 2017.

“The election is behind us, but the national debt keeps charging full steam ahead,” Michael Peterson, CEO of the Peter G. Peterson Foundation, said in a statement.

“America crossed $35 trillion in debt over the summer and sped past $36 trillion before Thanksgiving,” Peterson added. “We now spend more on interest than national defense. This debt spiral needs to stop as the new administration and Congress face major fiscal deadlines in 2025.”

Neither political party has shown any real interest in cutting the debt, preferring instead to sign off on budget deals that just roll over the current level of spending. But 2025 could be a different matter.

The Republicans will control both houses of Congress along with the presidency. If they cannot agree to deals to rein in the budget, they will own it. But Trump has laid out an ambitious economic plan that includes tax cuts and an increase in tariffs on imported goods. Economists believe both could be inflationary or tariffs could slow consumption that would reduce revenues coming into the Treasury.

Market interest rates have already surged since mid-September on the assumption the economy may initially grow faster than anticipated and that inflation may last longer above the 2% annual target set by the Federal Reserve. That means interest on the debt will continue to remain high, thwarting attempts to bring down the overall level of debt.

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Nonetheless, consumers appear to be happier now that the election is over and Republicans especially are feeling cheerier. Higher taxes and cuts to entitlement programs could slow the rate of increase in the debt but are politically difficult for both parties. That means the bond market may continue to squeeze politicians by maintaining interest rates higher.

Some of the 2017 tax cuts that Trump championed in his first term are set to expire next year, putting Congress in a position where it will have to do something. There is talk of a combined extension of the existing tax cuts with some other deals, including tariffs, that could provide cover for Republicans to argue they are paying for the cost of the cuts. This will likely be a test of the new Congress, where budget hawks may prove to be a thorn in the side of the new administration.

“There’s still a lot of budget hawks in Washington,” says Anthony Saglimbene, chief market strategist at Ameriprise Financial.

For now, the choice of Bessent will appease the markets, and who Trump chooses to chair the National Economic Council – the other key player of his economic team yet to be announced – could also be a factor.

Trump also made a number of announcements regarding the makeup of his health policy team. Spending on health programs such as Medicare and Medicaid are huge parts of the federal budget and bringing cost savings to those could help with the long-term trajectory of the budget. But, again, these have proven to be treacherous political waters.