President-elect Donald Trump ‘s flurry of announcements regarding Cabinet choices has left investors with one unexpected headache: a suddenly cloudy picture of who will take the all-important position of Treasury secretary. Wall Street had been anticipating that Trump likely would hand the job to Scott Bessent, founder of Key Square Group and leader of a core group of candidates that includes Sen. Bill Hagerty, R-Tenn., and billionaire businessman Howard Lutnick, the Trump transition chair who has received the blessing of Trump confidante Elon Musk . But multiple reports indicate that the winds are shifting, with several other names now entering the mix. The sudden confusion has caused some queasiness among investors , who also have been nervous about rhetoric lately from Federal Reserve officials that has injected uncertainty into expectations for interest rate cuts. “We think concern over the Treasury pick was at least as important a driver of market weakness Thursday/Friday as the signal from Powell that the Fed is going to be more non-committal on its rate plans โ which is itself a product of uncertainty over Trump policy,” Evercore ISI analysts said in a note Monday. Stocks found some footing on Monday after the Trump trade rally was cut short last week. Economists have worried that President-elect Trump’s agenda could bring along a resurgence in inflation as well as a spike in growth. That, in turn, could cause the Fed to take a more cautious approach to anticipated rate reductions, setting up a potential clash with Trump. One somewhat new name to emerge into the Treasury conversation is former Fed Governor Kevin Warsh. Speculation had been that Warsh would be a potential successor to Fed Chair Jerome Powell when the latter’s term expires in 2026. However, The Wall Street Journal reported Sunday that Warsh also has emerged as potential Treasury contender. Warsh “is a seasoned D.C. hand that the market would also be comfortable with, though his closeness to and ability to influence Trump is unproven,” Evercore wrote. One related issue that has rattled markets has been the potential for continued widening in the budget deficit and, by extension, the national debt. Trump has not made deficit reduction a central part of his platform, and the bond market has grown nervous that more deficits will drive higher yields. “We think bond market credibility is key as the biggest threat to the Trump agenda is the possibility that an overdose of reflationary policies drives yields to 5+% on the ten-year, tanking the housing market and stocks,” Evercore said. Yields took another leg higher on Monday amid the Treasury uncertainty. However, Fundstrat research chief Tom Lee said that once the Treasury choice issue is settled, that should restore some market confidence. “That’s what I consider a clearing event,” Lee said Monday morning on CNBC’s ” Squawk Box .” “It takes away uncertainty. The Trump trade, I think, is still intact.” Correction: This story has been updated to correct the spelling of Sen. Bill Hagerty’s name.
