Bank of America reversed its entire interest rate position in less than a week. Last Monday they told clients the Fed would hold rates steady through December. This Monday they're calling for three rate hikes. The bank's economists presumably spent the interim period staring at the same Bloomberg terminal everyone else has been watching for six months.
Inflation got "unambiguously worse" according to the report. Unambiguously. That's the word you use when you need seven syllables to admit you were unambiguously wrong last Tuesday. The consumer price index didn't sneak up on them. It arrived via scheduled government release at 8:30 AM Eastern like it does every single month.
Retail traders who repositioned their portfolios based on last week's call now get to repositioned them again based on this week's call. Then they'll reposition again next week when Bank of America's economics team watches another number go up on a screen and experiences a fresh revelation. This is called research coverage. You pay 8 basis points a year for this service.
The Fed will either hike rates or it won't. Bank of America will either be right or wrong. If they're wrong they'll reverse their position the following week and call that one unambiguous too. If they're right they'll send out a press release about their forecasting accuracy and conveniently omit the part where they predicted the opposite thing ninety-six hours earlier.
Somewhere a day trader just panic-sold his tech stocks because a bank that can't maintain a thesis for five business days told him to. He'll buy them back Friday after the next revision. His cost basis is now unambiguously f*cked.
Photo by Don Stouder on Unsplash
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