Bad news is good news. You know how it goes.

The US labor market’s plainly rolling over. Private sector hiring’s negative, which is to say employers aren’t hiring, they’re firing. Especially at small businesses which, according to ADP, shed the most jobs last month in at least 15 years if you exclude the volatile months around the onset of the pandemic.

That’s no good unless you’re in the camp that only cares about the read-across of a struggling jobs market for monetary policy, in which case it’s great.

As long as it doesn’t presage a broader, deeper economic downshift (i.e., a recession), a couple of hundred thousand lost jobs might be just what the doctor ordered for an equity market trading rich to history on most traditional metrics — and in need of an excuse to keep trading that way as critics pose pointed questions of the market leadership, where capital-light models have morphed into capital-intensive businesses virtually overnight.

The figure below’s a reminder: The S&P bottomed last month when December rate-cut odds waned to just ~25%. Then John Williams saved the day.

“Markets have become accustomed to supportive policy — both monetary and fiscal — with deviations from this norm being greeted with a nervy response,” Citadel’s Nohshad Shah remarked. “The drop from all-time highs was predicated on (what seemed like) a hawkish pivot from Jerome Powell at [October’s] FOMC presser [but] Williams’ dovish speech moved the probability of a rate cut back” to a near certainty.

Needless to say, not everyone’s enamored with that sort of Fed-SPX feedback loop — it’s a kind of addiction liability for policymakers which, as Shah put it, “engenders moral hazard.” But it is what it is, and as Shah went on to write, it highlights “the significance” of Donald Trump’s pick to replace Powell.

Some of the drama’s out of The Apprentice: FOMC Edition by now. Most people think Kevin Hassett has it in the bag. His Kalshi odds were nearly 85% Wednesday and as Kalshi will loudly insist, betting markets are usually right.

Whatever they say in public, that’s gotta hurt if you’re Miki Bowman, Chris Waller and Kevin Warsh. Hassett’s at least a real economist — as opposed to, say, Stephen Moore who just plays one on conservative television — but to state the obvious, he’s not considered to be the same caliber of candidate for a job like this as everyone else named on that chart.

Of course, that’s just like Trump: “Here are half a dozen people, which one would you like, sir?” “Rank them in order of respectability and take the one at the bottom.” (Trump would’ve picked Larry Kudlow if he thought he could get away with it.)

All jokes about the Fed having no credibility anyway aside, exactly nobody believes Hassett’s the best person for this job. Least of all Hassett himself. And everyone understands he’s the most cartoonish among the finalists which, again, goes a very long way towards explaining why Trump’s leaning in his direction.

Between a US labor market now making a very strong case for the Fed’s already-established inclination to overweight downside risks to jobs versus upside inflation risks, and the fact that Hassett’s a proud, avowed sycophant, there’s every reason to suspect that by this time next year, Fed funds will be meaningfully below neutral, which is to say decidedly accommodative.

That’s good news for equities up to and until it risks rekindled inflation and a(nother) “losing the long-end” moment. Remember: Consumer inflation expectations in the US are likely to be more volatile now that those too young to remember the 1970s have experienced a bout of what, for an advanced economy, counts as runaway price growth.

Hassett isn’t credible as a policymaker in the first place, and he’ll be even less so acting as Fed Chair for a US president with no qualms about wading into monetary policy. That means markets won’t trust a Hassett Fed to make hard choices in the event hard choices have to be made, as they were in 2022.

In the meantime — i.e., between now and whenever it goes off the rails, because it probably will to a greater or lesser degree at some point if Trump does indeed install Hassett in a chair where he doesn’t belong — I suppose stocks have reason to celebrate.

Hassett after all, is a friend of equities, if not an especially gifted prognosticator of them. He famously co-authored a book called “Dow 36,000” which, among other things, argued that “stocks are undervalued, not overvalued” and that US equities “could immediately double, triple or even quadruple and still not be too expensive.”

Hassett was right. The Dow did ultimately hit 36,000. But he was a little early. The book was published on September 20, 1999. The Dow hit Hassett’s target 22 years later. Who knows, maybe it’ll revisit 36,000 at some point during his tenure as Fed Chair.