Markets can’t afford to ignore Bessent’s warning shot

US Treasury Secretary Scott Bessent last week made a comment that should have sent markets into deep reflection. Instead, it was largely shrugged off.

He suggested that the White House’s unprecedented revenue-sharing deal with Nvidia and AMD could be extended to other industries. This single line carries profound implications — and the muted reaction says more about investor complacency than anything else.

The arrangement currently in place compels Nvidia and AMD to hand over 15% of certain Chinese sales to Washington in exchange for export licences.

Bessent called it a “model” and a “beta test.” President Trump reinforced the idea by comparing modified chip exports to the downgraded fighter jets the US sells abroad.

If this experiment were to expand to other sectors, it would fundamentally alter how globally active companies interact with the US government. It would rewrite rules of trade, supply chains, and corporate valuations.

I said earlier last week that “overstretched markets are vulnerable to precisely this kind of policy surprise.”

We are in a moment where investors are pricing perfection — and a policy template that could be rolled out across industries is anything but perfect. It is disruptive, unpredictable, and open-ended. That should not be ignored.

The danger is that investors are fixated on a single theme: the Federal Reserve cutting rates in September. Soft inflation data has all but convinced markets a cut is coming, with futures pricing a 94% probability.

Some are even betting on a 50-basis-point move after Bessent himself called on the Fed to be bold. The S&P 500, Nasdaq, Dow, Russell 2000, and MSCI All Country World Index all hit fresh highs on this expectation. In other words, global positioning has become dangerously one-sided.

But markets built entirely around one assumption are fragile. Add a new industrial policy template into the mix, one that Washington could apply beyond semiconductors, and the spectrum of possible outcomes broadens dramatically.

What makes the situation even riskier is that the rally is already thin. In a healthy, broad-based uptrend, earnings strength is visible across sectors.

Today, it’s selective. This leaves indices looking strong on the surface while being hollow underneath. When strength is concentrated and liquidity is light, as it often is in August, markets can turn violently. A handful of good sessions convinces traders a durable uptrend has formed, only for sentiment to collapse when the data flow turns against them. This is a textbook environment for sharp reversals.

For investors, the critical point is this: Bessent’s remarks are not idle speculation.

They hint at a framework that could extend beyond chips. If that happens, global business will have to operate under a new set of rules overnight.

Revenues, margins, and capital expenditure plans would all need to be reassessed. Cross-border investment flows would feel the impact immediately. The knock-on effects would not stay confined to semiconductors.

I don’t believe the market is prepared for that possibility.

At record highs, optimism is being priced without much thought for what could go wrong. And it is precisely at these moments — when the headlines are euphoric, when positioning is crowded, and when liquidity is thin — that disruptive variables carry the most risk.

This is not a call to panic. It’s a call to pay attention. Record highs don’t reduce risk; if anything, they amplify it.

Investors should be reassessing exposure, rebalancing portfolios, and considering what happens if policy, data, or geopolitics break from the script everyone has chosen to believe. Chasing the last leg of this rally on the assumption that nothing can go wrong is the most dangerous move of all.

Bessent has effectively fired a warning shot. Whether markets want to hear it or not, investors should be listening.