Overnight "trading" has shown a reversal trend, with a surge in U.S. Treasuries, a plunge in the U.S. dollar, and small-cap stocks giving up gains. Behind these movements, the nomination of Beasant as the U.S. Treasury Secretary has eased investors' concerns about trade tariff plans, but the market should not get overly excited...

Specifically, the U.S. dollar index closed down about 0.6%, following its largest drop in over two weeks, and the index has risen more than 7% from early last month to Friday. The dollar has been the main beneficiary of "trading," with market expectations that the Republican Party's tariffs and tax cuts will drive inflation and put upward pressure on U.S. interest rates.

U.S. Treasuries also rebounded, with the yield on the 10-year U.S. Treasury note falling 14 basis points to 4.27%, marking one of the best performances this year.

The U.S. stock market rose, with the blue-chip S&P 500 index up 0.3%. The Russell 2000 index, which has a higher proportion of small-cap stocks, once touched a new high before giving up some gains.

Investors widely anticipate that Beasant will mitigate the impact of the government's aggressive trade and economic policy proposals. However, on the other hand, the market should remain cautious and not get overly excited.

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Analysis suggests that there should not be too much interpretation of the Treasury Secretary nomination; the Treasury Secretary "is not the person who designs the details of the implementation strategy for trade tariffs."

Nomination of Beasant, the market is excited

Last month, Beasant described large-scale tariff policies as "extremist" positions. Earlier this month, Beasant suggested in a media interview that tariffs should be imposed "gradually and in stages" to reduce the risk of market impact and seemed willing to negotiate on the specific scale of the tariffs advocated by the incoming president.

Paul Donovan, Chief Economist at UBS Global Wealth Management, said that it is a good thing for the market that at least one important member of the cabinet opposes the continuous imposition of trade taxes. Vincent Chaigneau, Head of Research at Allianz Global Investors, believes that Beasant's nomination indicates that policies with the most inflationary impact, including tariffs, may not be "fully" implemented.

Greg Peters, Co-Chief Investment Officer at PGIM Fixed Income, said:

The market is very worried that someone more extreme will be chosen; this nominee is capable, qualified, and is considered the "adult in the room," which the market likes.

UBS trading department stated that the focus of the market on Monday was particularly digesting Beasant's nomination as the next U.S. Treasury Secretary, in short:

He is a fiscal hawk (i.e., lowering interest rates), a person who acts more slowly on tariffs, and a candidate who supports tax cuts; all of these positions are beneficial for growth and favorable for cyclical/mid-cap stocks (especially those that are oversold and have high short positions).

Should not let down the guard

However, on the other hand, the market should remain cautious and not get overly excited.

Analysts at Mitsubishi UFJ Financial Group (MUFG) said:

Although Beasant has hinted in the past that a more balanced approach to implementing trade tariffs might be taken. But do not overinterpret this nomination; the Treasury Secretary "is not the person who designs the details of the implementation strategy for trade tariffs."

This is similar to the view of Harvard University professor Jason Furman, who said that a fundamental point is that under the government's leadership, the Treasury Secretary will not ultimately drive policy; only the president will drive policy.

Furthermore, it should be noted that Beasant's nomination requires approval from the U.S. Senate to take office, which contradicts the series of absolutely loyal individuals chosen for other key positions.

Skylar Montgomery Koning, a foreign exchange strategist at Barclays Bank in New York, also warned:

The selection of Beasant as Treasury Secretary has caused the U.S. dollar to fall, but this is only a temporary retreat after a rapid fluctuation, not a change in direction. Tariffs are coming, which is beneficial for the U.S. dollar.

Just this morning, tariffs were announced; on the local time of the 25th, a 25% tariff will be imposed on all products entering the United States from Mexico and Canada. In addition, it was announced that an additional 10% tariff would be imposed on Chinese goods.

Market trading also reversed from Monday, with the U.S. dollar short-term lift, the offshore renminbi against the U.S. dollar approaching the 7.26 mark, and the Mexican peso falling more than 1%.