WSJ What’s News: Markets Cheer Trump’s Treasury Secretary Pick (November 25, 2024)

In this comprehensive episode of WSJ What’s News, The Wall Street Journal delves into significant political appointments, global climate finance developments, blockbuster movie successes, and the evolving landscape of commercial real estate. Hosted by Kate Bullivant, the episode provides insightful analysis and expert opinions to keep listeners informed about factors influencing markets and the broader economic environment.

1. Trump Nominates Scott Besant as Treasury Secretary

The episode opens with the announcement that Donald Trump has nominated Scott Besant, a prominent hedge fund manager and one of his most vocal supporters in the finance sector, to lead the Treasury Department. This move elevates Besant to a pivotal role in the administration, tasked with transforming Trump’s campaign promises into actionable economic policies.

Alex Frangos, Europe Finance Editor for WSJ, offers a detailed analysis of Besant's nomination:

“Besant historically hasn't been a pro-tariff person. He has obviously come as a Trump supporter and seems willing to implement, but that gives a little bit of breathing room for people to think that maybe he's somewhat practical about how tariffs are going to work and that he's described them as a tool that you use to get to the bargaining table and get to a place where you have good trade relations.” ([02:18])

Frangos highlights that Besant's pragmatic stance on tariffs may reassure Wall Street, which fears that tariff policies could destabilize markets, increase volatility, and reignite inflation. The nomination has already positively influenced market sentiments, with the dollar experiencing a slight decline, bond yields decreasing, and stock futures showing an upward trend.

2. Deputy Secretary of Defense Potential Appointees

Donald Trump is also considering two investors for the role of Deputy Secretary of Defense, the second-highest civilian position at the Pentagon. The potential candidates are Trey Stevens, a partner at venture capital firm Founders Fund, and Steven Feinberg, co-CEO of Cerberus Capital Management.

The selection of either Stevens or Feinberg is anticipated to benefit the burgeoning defense startup ecosystem. Both candidates have substantial investments and leadership experience within the defense sector, which could spearhead the management of the defense budget and foster innovation among new military-oriented enterprises. While Feinberg's spokesperson has confirmed he hasn’t been offered a position, Stevens and Founders Fund have declined to comment, and Trump’s office has not provided a response to requests for comment.

3. Appointment of Laurie Chavez de Rima as Labor Secretary

In another significant appointment, Trump has nominated Laurie Chavez de Rima as Labor Secretary. Chavez de Rima is noted for being a rare pro-union Republican, a move that comes amidst internal debates within the Republican Party regarding labor policies. This nomination reflects a potential shift in the GOP’s traditional stance towards organized labor, which was a topic of discussion on the show’s recent episodes.

4. Global Climate Finance Agreement Amid Political Uncertainty

Over the weekend, the United States, Europe, and several other wealthy nations reached an agreement to increase annual climate financing to at least $300 billion by 2035. This accord concluded the climate talks in Azerbaijan but faced criticism from developing countries, particularly India, for being insufficient and delayed.

Chandni Rayna, an Indian delegate, expressed strong dissatisfaction:

“The amount that is proposed to be mobilized is abysmally poor. It's a paltry sum. It is not something that will enable conducive climate action that is necessary for the survival of our country and for the growth of our people, their livelihoods.” ([04:08])

Matthew Dalton, a Journal reporter present in Azerbaijan, points out that the potential for a second Trump presidency introduces uncertainty regarding the US’s commitment to this pact:

“The US is supposed to be the single largest funder of these efforts, so if Trump is going to pull out of the Paris Accord, he's also going to slash funding, presumably for climate finance projects. That's probably going to be supported by the Republican-controlled House and Senate, at least over the next two years.” ([04:30])

Scott Besant adds further concerns about the feasibility of the agreement without active US participation:

“The agreement says $300 billion a year by 2035, but there's 10 years in between that and so there's got to be some kind of steady increase for the next four years. That's going to be very difficult without the US really engaged.” ([04:39])

The episode underscores the fragility of international climate commitments in the face of changing US political landscapes and administration priorities.

5. Box Office Triumphs: 'Wicked' and 'Gladiator 2' Boost Theater Revenues

Hollywood delivered strong performances this weekend with Universal Pictures' adaptation of the stage show "Wicked" grossing an impressive $114 million in its opening weekend. Additionally, Paramount Pictures’ "Gladiator 2" earned around $55 million, collectively providing a much-needed uplift for theater owners amidst fluctuating box office revenues.

6. European Banking Sector Sees Major Deal with UniCredit’s Acquisition of Banco BPM

In European financial news, Italy's UniCredit has launched a $10.5 billion offer to acquire Banco BPM, aiming to create the eurozone's largest bank by market value. This strategic move, pending regulatory approval, is projected to conclude by June and signals a surge in deal-making activity among European lenders. The acquisition is buoyed by the gradual decline of high interest rates, which fosters a conducive environment for mergers and acquisitions within the banking sector. Banco BPM’s shares responded positively, rising at the Milan open following the announcement.

7. Deep Dive into Commercial Real Estate with Experts

One of the episode’s highlights features an in-depth discussion on commercial real estate (CRE), a topic of increasing relevance in the post-pandemic economic landscape. Rebecca Rocky, Deputy Chief Economist at Cushman & Wakefield, provides expert insights into the current trends and future outlook of CRE.

Key points discussed include:

• Shift in CRE Investment Focus: While traditional office spaces face challenges due to the rise of remote work, sectors like data centers, industrial multifamily properties, and warehouses are experiencing sustained demand. Rocky notes, “...over time there's going to be a scarcity of supply” in these high-demand sectors ([08:27]).

• Mixed Outlook for Office and Retail Spaces: Despite growth in certain CRE segments, the broader outlook remains cautious. Properties such as old office buildings and rundown malls continue to struggle, posing refinancing challenges, especially in a high-interest-rate environment. Rocky emphasizes the ongoing risks: “...the fundamental question of nobody really wants to be in this building are going to persist and that could all get worse again depending on what happens with interest rates” ([09:18]).

• Investment Exposure and Risk Management: For investors, understanding exposure to different CRE segments is crucial. While Real Estate Investment Trusts (REITs) offer exposure to high-quality properties, investments in riskier segments like lower-tier offices or debt instruments related to CRE require careful portfolio assessment. Rocky advises, “...it's a good excuse to do a kind of health checkup on your portfolio and understand a little bit of what part of commercial real estate you actually are exposed to” ([11:00]).

The discussion concludes with responsible financial advice, urging investors to evaluate their CRE investments meticulously to navigate the complexities of the current market.

Conclusion

This episode of WSJ What’s News provides a multifaceted exploration of critical developments affecting markets and the economy. From high-stakes political appointments and international climate agreements to significant cultural milestones and sector-specific analyses, the episode equips listeners with valuable knowledge to comprehend and anticipate market movements. The expert commentary and detailed breakdowns ensure that even those who haven’t listened to the podcast can grasp the essential insights and implications discussed.