White House economic adviser Kevin Hassett hasn’t the best track record on markets.
Hassett cowrote the book Dow 36,000 at the peak of the dotcom bubble in 1999, saying stocks could “quadruple tomorrow and still not be too high”.
Alas, the Dow soon sank into a lengthy bear market, bottoming at 6,500 in March 2009.
Hassett resurfaced as markets bottomed, accusing President Barack Obama of a “war on business” and warning: “No wonder that markets are imploding around us.” Within days, an 11-year bull market began.
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The Dow eventually passed 36,000 in 2021 – fashionably late, by about two decades. Yet “Dow 36,000″ was no career-ender, and Hassett may soon wield real influence over markets.
The Wall Street Journal reports he is a front-runner to replace Jerome Powell as Federal Reserve chairman next year, setting up a high-stakes reality-TV-style contest with former Fed governor Kevin Warsh.
Warsh has the “telegenic” edge, per the Journal, but may be too hawkish. Either way, Donald Trump will hope the so-called battle of the two Kevins will make for good TV.
The stakes, though, are serious.
Once a defender of Fed independence, Hassett now echoes Trump’s demands for aggressive rate cuts and recently accused Powell of cutting rates “right ahead of the election to help Kamala Harris”.
As TS Lombard economist Dario Perkins notes, the real loser may not be Powell, but his successor.
Whoever wins will arrive with a “tacit understanding” to cut rates, and strong doubts about their independence.
