August Turmoil: Bessant Intervenes, Policy Secrets Quietly Revealed

August, which should have been a slow season for the market, turned into a profound release of policy signals.

U.S. Treasury Secretary Scott Bessent's interventions in the USD/JPY exchange rate and long-term U.S. Treasury bonds sent a clear message to the market: the authorities would rather choose currency devaluation than allow the bond market to collapse. This statement reshaped investors' investment logic, making gold, Bitcoin, and commodities the focus of the market, while the narrative of artificial intelligence is rapidly shifting from the "construction phase" to the "application phase." Goldman Sachs partner Mark Wilson characterized this series of events as a "serious August sequence of events."

Wilson believes that Bessant's intervention was the most important policy turning point this month. He first intervened in the USD/JPY exchange rate, then promoted long-term US Treasury repurchase agreements—the so-called "Operation Twist"—while simultaneously expanding bank balance sheets and shrinking the Federal Reserve's balance sheet, demonstrating to the market that the policy toolbox is far from empty. Goldman Sachs' interest rate team points out that these repurchase operations may improve long-term supply and demand, but they do not address the fundamental drivers pushing up global (not just US) long-term yields.

The market reacted swiftly and directly to this policy signal . Over the past ten days, investors have shown significant anxiety about insufficient exposure to "store of value" assets, and the investment logic for gold, Bitcoin, and other metals has returned to the core of every investor conversation.

Meanwhile, Nvidia's market capitalization surged by nearly $500 billion in a single day, and the software ETF IGV recorded its best single-day gain in two decades. However, the S&P 500 index, excluding AI-related stocks, fell by 0.7% that day. The difference in market breadth is unprecedented this century— two completely different narratives are running in parallel in the same market.

Policy trump card: The true meaning of Bessant's "Operation Twist"

The continued rise in long-term yields is a significant risk to the already prolonged stock market bull run, especially given the generally deteriorating fiscal conditions in developed economies. Bessant's series of interventions mark a crucial policy turning point.

Mark Wilson points out that Bessant's "Operation Twist," along with other recent policy moves, conveys a core message: policy coordination between the Federal Reserve and the Treasury has become clearer, and the authorities will use all means to support nominal growth. This isn't about how billions of dollars in Treasury bond buybacks can change the debt stock; rather, it's about the policy response function becoming clearer—the authorities will choose currency devaluation before the bond market collapses.

Goldman Sachs' interest rate team explicitly stated that this repurchase operation may marginally improve the supply and demand of long-term assets, but the fundamental driver of rising global long-term yields—namely, the fiscal arithmetic of developed economies—remains unchanged. However, the significance of this intervention at the positioning level far outweighs its technical effects: it tells investors that nominal growth will be backed by policy, and those with insufficient exposure to "store of value" assets are already behind the times.

Wilson believes that the investment logic for gold, Bitcoin, and metals has returned to the core of market discussions over the past ten days, which is a direct reflection of this policy signal.

Nominal Growth: The Macro Narrative of Nvidia and AI Capital Expenditure

Bessant's intervention had a clear policy objective: to underpin strong nominal growth in the United States. Wilson stated that, at the micro level, nothing embodies this narrative better than Nvidia.

Following Nvidia's strong second-quarter results, Goldman Sachs raised its 2028 revenue forecast to $955 billion, an increase of $165 billion from its previous forecast—equivalent to creating a company the size of Mercedes-Benz or BP overnight (in terms of revenue).

Even more remarkably, Goldman Sachs 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 the combined size of the two largest companies in Europe by revenue—Volkswagen and Shell—within two years.

Meanwhile, investment-grade bond issuance hit a record high in August, with hyperscale cloud computing companies contributing significantly. Nvidia's announcement of a $500 billion financing consortium to back the residual value of GPUs has even deeper implications: it will drive the standardization of computing power specifications and capacity, eliminate potential constraints on growth due to financing bottlenecks, and effectively reduce the capital costs for the largest builders of AI infrastructure.

A Shift in AI Narrative: From the "Construction Phase" to the "Application Phase"

The two corporate announcements provide a clear illustration of the new stage in AI development.

On August 19, Moderna's stock price surged 175% in a single day, marking the largest single-day gain in the history of the S&P 500 , as the company announced the results of its research on personalized vaccines to prevent melanoma recurrence, demonstrating the feasibility of customized and effective individual cancer treatment.

On the same day, Stripe announced its acquisition of OpenRouter and wrote in its letter to shareholders: "We believe that January 1st marks the beginning of a singularity... We see a major inflection point in long-term trends... The promise and collective hope of AI lies in its potential to bring greater material prosperity and abundance."

Mark Wilson believes that these two announcements clearly reveal the innovative possibilities of AI moving from the "construction" phase to the "usefulness" phase. AI is no longer just a chatbot; Moderna-style applications and Stripe's concept of the "singularity" are no longer science fiction.

The market's attention is shifting from the beneficiaries of the AI construction phase (memory, semiconductors, hardware) to the real beneficiaries of the AI deployment phase—those companies whose stock prices have not yet reflected this shift.

Market Cracks: Two Narratives, One Market

Although the above events are generally positive, risk management in August was far from smooth sailing.

After Nvidia released its earnings, its market value surged by nearly $500 billion in a single day, but then gave back about $250 billion the following day.

The IGV Software ETF recorded its best single-day gain in 20 years;

However, market breadth was extremely poor that day—only once this century has the S&P 500 risen by more than 60 basis points with such a small number of component stocks rising.

The "S&P 500 excluding AI" index fell 0.7% on the day, while Goldman Sachs' "AI Winners vs. AI Risks" portfolio fell 3%.

Mark Wilson interprets this as follows: Nvidia's astonishing revenue growth is likely eroding spending in other areas, just as Salesforce's performance shows that software itself will become a key beneficiary of AI in some areas.

The difficulty of positioning and predicting AI exposure is undoubtedly increasing —the software still has a large allocation on the short side of Goldman Sachs' 12-month momentum factor, but its weight on the long side of the 3-month momentum factor is already 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, and a reduction in total exposure may follow.

In summary, Wilson believes that all the events in August point in the same direction: the government will underpin nominal growth, AI capital expenditures will not be suspended, and the "usefulness" phase is no longer science fiction.

However, the market is not pricing one story, but two stories that do not exist on the same price band.

Record investment-grade bond issuance by a hyperscale cloud computing company, $500 billion in GPU residual value backing, and the best single-day performance in software in two decades—while the S&P 500 excluding AI fell, with market breadth among the worst this century, and the AI winners pairing was severely damaged.

Wilson argues that this is not a clean bull market. It's a market where the government is confident that long-term or nominal growth won't falter, but is debating who will truly benefit from it.

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