August Turmoil: Bessent Intervenes, Policy's Hidden Card Quietly Revealed

August was supposed to be a slow season for the market, but it has turned into a profound release of policy signals. U.S. Treasury Secretary Scott Bessent intervened in the U.S. dollar to Japanese yen exchange rate and the long end of the U.S. Treasury market in succession, conveying a clear message to the market: authorities would prefer to choose currency devaluation rather than allow the bond market to collapse. This statement has reshaped investors' positioning logic, with gold, Bitcoin, and commodities becoming the market's focus, while the narrative around artificial intelligence is rapidly shifting from "construction phase" to "application phase." Goldman Sachs partner Mark Wilson characterized this series of events as a "consequential August event sequence." Wilson believes that Bessent's intervention marks the most important policy inflection point of the month. He first intervened in the dollar-yen exchange rate and then promoted long-end Treasury buybacksknown as "twist operations"while also expanding bank balance sheet capacity and compressing the size of the Federal Reserve's balance sheet, demonstrating to the market that the policy toolbox is far from exhausted. Goldman Sachs' rates team pointed out that these buyback operations may improve long-end supply and demand but do not address the fundamental drivers pushing global (not just U.S.) long-end yields higher. The market reacted swiftly and directly to this policy signal. Over the past ten days, investor anxiety regarding insufficient exposure to "value-storage" assets has become evident, bringing gold, Bitcoin, and metals back to the core of every investor's conversation. At the same time, Nvidia's market value surged nearly $500 billion in a single day, and the software ETF IGV recorded its best daily gain in twenty years, yet the S&P 500 index fell 0.7% after excluding AI-related stocks, indicating a rare disparity in market breadthtwo entirely different narratives are running in parallel within the same market. Policy Backdrop: The True Meaning of Bessent's "Twisted Operations" The ongoing rise in long-end yields poses a visible risk to an already extended stock bull market, especially against the backdrop of deteriorating fiscal conditions in developed economies. Bessent's series of interventions signifies an important policy turning point. Mark Wilson notes that Bessent's "twist operations," along with other recent policy measures, convey a core message: the coordination between the Federal Reserve and the Treasury has become clearer, and the authorities will do whatever it takes to support nominal growth. This is not just about changing the debt stock with a few billion dollars in Treasury buybacks, but rather that the policy reaction function has become clearerofficials will opt for currency devaluation before allowing the bond market to crack. Goldman Sachs' rates team explicitly states that the current buyback operations may marginally improve long-end supply and demand, but the fundamental drivers of rising global long-end yieldsthe fiscal arithmetic of developed economiesremain unchanged. However, the significance of this intervention at the positioning level far exceeds its technical effects: it tells investors that nominal growth will be endorsed by policy, and those with insufficient exposure to "value-storage" assets are already behind the curve. Wilson believes that over the past ten days, the investment logic around gold, Bitcoin, and metals has returned to the core of market dialogue, directly reflecting this policy signal. Nominal Growth: Nvidia and the Macro Narrative of AI Capital Expenditures Bessent's intervention aims to underpin the strong nominal growth of the United States, according to Wilson, and on a micro level, nothing embodies this narrative better than Nvidia. After Nvidia reported strong second-quarter results, Goldman Sachs raised its revenue forecast for 2028 to $955 billion, an increase of $165 billion from the previous estimateequivalent to creating a company the size of Mercedes-Benz or BP overnight (in terms of revenue). Even more strikingly, Goldman predicts that Nvidia's revenue will grow by $543 billion over the next two years (from $412 billion in 2026 to $955 billion in 2028), which is equivalent to creating the combined scale of the two largest revenue-generating companies in EuropeVolkswagen and Shellwithin two years. Meanwhile, August saw record levels of investment-grade bond issuance, with hyperscalers contributing significantly. Nvidia announced the establishment of a $500 billion financing alliance to back the residual value of GPUs, which has more far-reaching implications: it will promote the standardization of computational specifications and capacities, eliminate potential constraints on growth due to financing bottlenecks, and effectively lower the capital costs for the largest builders of AI infrastructure. AI Narrative Shift: From "Construction Phase" to "Application Phase" Two corporate announcements provided clear annotations for AI's transition into a new stage of development. On August 19, Moderna's stock soared 175% in a single day, marking the largest single-day increase for an S&P 500 component stock ever, because the company announced research results on personalized vaccines to prevent melanoma recurrence, demonstrating the feasibility of customized, efficient cancer treatment. On the same day, Stripe announced the acquisition of OpenRouter and stated in a letter to shareholders: "We believe that January 1 marks the beginning of the singularity We are witnessing a significant turning point in long-term trends AI's promise and collective hopes lie in its potential to bring greater material prosperity and abundance." Mark Wilson believes these two announcements clearly reveal the innovative possibilities of AI transitioning from the "construction" phase to the "usefulness" phase. AI is no longer just about chatting; applications like Moderna's and Stripe's expressions of "singularity" are no longer just science fiction. Market attention is shifting from beneficiaries during the AI construction phase (memory, semiconductors, hardware) to genuine beneficiaries during the AI deployment phasethose companies whose stock prices have not yet reflected this transition. Market Fracture: Two Narratives, One Market Despite the overall positive direction indicated by the above events, August's risk management has been far from smooth. After Nvidia's earnings release, its market value surged nearly $500 billion in a single day, only to retract about $250 billion the next day; The IGV software ETF recorded its best daily gain in twenty years; However, the market breadth on that day was extremely poorout of the century, only once has the S&P 500 risen more than 60 basis points with such a small number of component stocks increasing. The "S&P 500 excluding AI" fell 0.7% that day, and the "AI winners vs. AI risks" pair created by Goldman Sachs dropped 3%. Mark Wilson interprets this as follows: Nvidia's astounding revenue growth is likely encroaching on expenditures in other areas, just as Salesforce's performance indicates that software itself will likely become a key beneficiary of AI in certain fields. The difficulty of positioning and forecasting around AI exposures is undoubtedly risingsoftware still has a large allocation on the short end of Goldman Sachss 12-month momentum factor, yet the weights on the long side of the 3-month momentum factor are now comparable. The high correlation between AI winners and momentum factors in June and July means that the clearing of consensus positions may take longer than expected, leading to a potential compression of overall exposure. In summary, Wilson believes that the direction of all events in August is consistent: the government will underpin nominal growth, AI capital expenditures will not pause, and the "usefulness" phase is no longer science fiction. However, the market is not pricing a single story; it is pricing two narratives that do not exist on the same trajectory. Record investment-grade bond issuance by hyperscaler cloud companies, a $500 billion GPU residual value backing, and the best single-day performance of software in twenty yearsyet at the same time, the S&P 500 fell when AI stocks were excluded, and the market breadth was among the worst of the century, while the AI winners pair suffered severe setbacks. Wilson believes this is not a clean bull market. The market is already convinced the state will not allow long-end or nominal growth to falter, but it is engaging in debates about who can truly benefit from this situation one by one. This article is reproduced from "Wall Street Insight," author: Dong Jing GMTEight, edited by Zheng Yuyang.