The Macro Minute: Is Bessent’s Bridge long enough to prevent a deep correction in stocks, part III?

Global financial markets currently assign a 61% probability to "Besson’s Bridge" successfully preventing a deep stock market correction, as the Treasury Department maneuvers to suppress volatility in bond and currency markets. This strategy prioritizes maintaining U.S. dominance in the AI race against China, bridging the gap to dovish monetary policy reforms expected this winter, and addressing voter affordability concerns before midterms. However, the Federal Reserve’s current policy rate remains 50 to 75 basis points too low relative to the rising neutral rate (R-star), creating upward pressure on inflation and bond yields. To counter "bond vigilantes" and support AI capital expenditures, the administration is likely to employ financial repression and monetary debasement. These actions, reflected in the recent rallies of gold and Bitcoin, signal a long-term shift toward co-joining fiscal and monetary policies to manage a persistent geopolitically driven supply-demand imbalance in the Treasury market.