August Turmoil: Besant Intervenes, Policymaking Strategies Quietly Revealed

August was expected to be a quiet season for the market, but it evolved into a profound release of policy signals.

U.S. Treasury Secretary Scott Bessent successively intervened in the USD/JPY exchange rate and the long end of U.S. Treasuries, sending a clear message to the market: authorities would rather choose currency depreciation than let the bond market collapse. This stance is reshaping investors’ positioning logic, with gold, bitcoin, and major metals coming into the market spotlight, while the AI narrative is also accelerating its shift from the "construction phase" to the "application phase." Goldman Sachs partner Mark Wilson characterized this series of events as the "consequential August event sequence."

Wilson believes that Bessent’s intervention is the most important policy node this month. He first intervened in USD/JPY, then pushed for long-end Treasury repurchases—so-called "twist" operations—which, combined with measures such as expanding banks’ balance sheet capacity and shrinking the Fed’s balance sheet, demonstrated to the market that the policy toolbox is far from exhausted. Goldman Sachs’ rates team notes that these repurchase operations may improve long-end supply and demand, but do not touch the underlying drivers pushing global (not just U.S.) long-end yields higher.

The market's reaction to this policy signal was swift and direct. Over the past ten days, investors have shown clear anxiety about their insufficient exposure to "store-of-value" assets, and gold, bitcoin, and metals have returned to the core of every investor dialogue.

Meanwhile, Nvidia’s market value soared by nearly $500 billion in a single day, the software ETF IGV saw its largest one-day gain in twenty years, but after excluding AI-related stocks, the S&P 500 index dropped 0.7% that day—a level of market breadth that is rare this century—two completely different narratives are running in parallel in a single market.

Policy Bottom Line: The Real Meaning of Bessent's "Twist" Operation

The continuous rise in long-dated yields is an evident risk facing the extended equity bull market, especially against the backdrop of generally deteriorating fiscal conditions among developed economies. Bessent’s series of interventions marks an important policy turning point.

Mark Wilson points out that Bessent’s "twist operation" and other recent policy measures together convey a central message: policy coordination between the Fed and the Treasury is now more explicit, and authorities will use every means to underpin nominal growth. This is not a problem of a few hundred billion dollars of Treasury repurchases changing the debt stock, but rather that the policy response function has become clearer—officials will choose currency depreciation before allowing the bond market to break.

The Goldman Sachs rates team makes it clear that while these repo operations may marginally improve long-end supply and demand, the fundamental driver of rising global long-end yields—developed market fiscal arithmetic—has not changed. However, the significance of this intervention in terms of positioning far exceeds its technical effect: it tells investors that nominal growth will be policy-backed, and those with insufficient exposure to "store-of-value" assets are already falling behind.

Wilson believes that over the past ten days, the return of gold, bitcoin, and metals investment logic to the center of market dialogue is a direct reflection of this policy signal.

Nominal Growth: Nvidia and the Macroeconomic Narrative of AI Capital Expenditures

The policy target of Bessent’s intervention is clear: to underpin strong nominal growth in the U.S. According to Wilson, nothing embodies this narrative more than Nvidia.

After Nvidia reported impressive second-quarter earnings, Goldman Sachs raised its revenue forecast for 2028 to $955 billion, up $165 billion from the previous projection—roughly equivalent to conjuring up a company the size of Mercedes-Benz or BP (by revenue) overnight.

Even more striking, Goldman forecasts 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, in two years, the combined size of Europe’s two largest companies by revenue—Volkswagen and Shell.

At the same time, August saw a historic high for investment-grade bond issuance, with hyperscale cloud companies making a notable contribution. Nvidia announced the formation of a $500 billion financing alliance to endorse residual GPU value, a move with far-reaching significance: it will promote the standardization of computing power specifications and capacity, eliminate potential financing bottlenecks to growth, and effectively reduce the capital cost for the largest builders of AI infrastructure.

AI Narrative Shift: From "Construction Phase" to "Application Phase"

Two corporate announcements provided vivid footnotes for AI’s step into a new phase.

On August 19, Moderna’s stock price soared 175% in a single day, marking the largest one-day gain for any S&P 500 constituent stock ever, after the company published research results on personalized vaccines preventing melanoma recurrence—showing the feasibility of customized, highly effective individual cancer therapies.

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

Mark Wilson believes these two announcements clearly reveal the innovative potential of AI advancing from the "build" stage to the "utility" stage. AI is no longer just about chatbots—Moderna-style applications and Stripe’s statement on the "singularity" are no longer science fiction.

Market attention is shifting from the beneficiaries of AI’s construction phase (memory, semiconductors, hardware) to the true beneficiaries of AI’s deployment phase—those companies whose share prices have yet to reflect this change.

Market Fractures: Two Narratives, One Market

Although the above events generally point to positive outcomes, risk management in August was far from smooth.

• After Nvidia’s earnings release, its market value surged by nearly $500 billion in a day, then gave back about $250 billion the next day;

• The IGV software ETF posted its best one-day gain in twenty years;

• However, market breadth that day was extremely poor—only once this century has the S&P 500 risen by more than 60bps when so few constituent stocks rose.

• "S&P 500 ex-AI" fell 0.7% that day, and the "AI winners vs AI risk" paired basket constructed by Goldman Sachs fell 3% that day.

Mark Wilson interprets this as follows: Nvidia’s astonishing revenue growth is likely eating into expenditures in other areas, just as Salesforce’s performance shows software itself will also become a key AI beneficiary in some sectors.

Positioning and predicting exposure to AI is assuredly becoming more difficult—software still has significant allocations on the short end of Goldman’s 12-month momentum factor, but now has a comparable weight on the long end of the 3-month momentum factor. The high correlation between AI winners and the momentum factor in June and July suggests that the clearing of consensus positions might be more prolonged than expected, and overall exposure reduction may follow.

In summary, Wilson believes that, combining all of August’s events, the direction is clear: the government will underpin nominal growth, AI capital expenditures will not pause, and the "utility" phase is no longer science fiction.

However, the market isn’t pricing a single story, but two stories—and these two stories do not exist on the same trajectory.

Record investment-grade bond issuance by hyperscale cloud companies, $500 billion residual GPU value guarantees, software’s best single-day performance in twenty years—meanwhile, the S&P 500 ex-AI fell, market breadth ranks among the worst this century, and the AI winners paired basket suffered heavy losses.

Wilson believes that this is not a clean bull market. This is a market that is convinced the state will not allow long-end or nominal growth to fail, but is arguing, one by one, about who can truly benefit from it.