How to deal with someone hired above you?

As the title, someone was hired above me and I don't know what that means or what I should do.

About me: Working at a fairly large Asset Management firm, I am part of a 5-person team in an alternative asset class; AUM ~$2B; 2.5 years on the job. I was hired right after undergrad (was an intern for 3 months and offered the full time job at the end of the internship). My title, associate, was made up because no-one in the firm has had that title. People are typically hired as an analyst with 2-3 years of experience (most of analysts worked at other buy-side firms/corporate banking/commercial banking before joining). I went to a non-target, but the firm is a local one, so it was not difficult to land an interview for the internship. My GPA was ~ 3.3 but the trend was bad (~3.9 in the first couple of years and then it dropped significantly because I was slacking ... However, my finance GPA was good ~ 3.7). My English is decent but I still have pretty strong accent.

About the new guy: Graduated 5 years ago from the same school, he went to work for a year and started the part-time MBA at the same school. He got his MBA a couple years ago and started working at a commercial bank. He has both CPA and CFA, so I guess he is pretty good with technicals. I have not met him yet but I saw his resume. Well-rounded guy with outstanding academics and he was even drafted for NHL/NFL (gotta be a bit vague here) but got injured early on so he stopped his pro sport career and went back to school.

My boss actually talked with me about hiring a new guy and I thought that person will come at my level. However, the new guy will be an analyst, which is higher than me. I will not have to report to him, but I am confused what this means for my future career. When I knew that the new guy will be an analyst, I started applying for other jobs because I was demoralized by the fact that someone will come higher than me. Unfortunately, I did not get a single interview (15 applications; 10 in big cities/financial hubs and 5 local). I don't know what went wrong (I got interviews for IB at a low BB and MM's by applying online before, so I don't think my resume is that weak that it is tossed away right away!?)

So I cannot leave for another job and I don't know what my future will be at the firm. What should I do now? I talked with my boss and he said I would be fine!? But I don't really know what that means ... Hope you guys can give some advice or suggestions. Thanks!