The Hassett Trade
Not another one, I hear you say. So far this year we’ve seen bandied around the TACO trade, the Trump put, FOMO trade, the MEGA trade, surely there isn’t another to surface before year end?! Wrong. The so-called Hassett trade is that which is currently pushing the Dollar lower but coming to the rescue of equities and higher risk assets. Kevin Hassett is the name of the current Director of the Economic Council but, more importantly, the forerunner to replace Fed Chair Jay Powell next year.
Powell has had his run-ins with the White House, particularly during Trump’s second tenure as President. They have conflicted on everything from benchmark rates being too high in the view of POTUS, through to the Fed’s assessment of US economic growth and productivity and even the Fed’s budget for its real estate development plan. Powell is due to step down in May 2026 and the plan to replace him involved candidates meeting with Vice President Vance this week and the President in due course. Earlier this week, meetings between Vance and candidates including Christopher Waller were cancelled abruptly.
The conclusion was that the POTUS’ mind was already made up and, as indicated during an interview on Air Force One, Hassett was lined up for the job. So why would that have made the Dollar weaken and risk assets take yet another leg higher? Hassett and Trump share a closely aligned view of where monetary policy should be. Hassett is regarded as a highly dovish candidate who would likely deliver the lower rates that the White House has repeatedly called for. If delivered, higher systemic inflation will become a risk but for now the prospect of lower rates from a Hassett-led Fed come May next year are pushing the Dollar lower and stocks higher.
Discussion and Analysis by Charles Porter
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