Goldman Sachs released hedging recommendations for a rate-shock scenario. The scenario has not happened. The bank decided this was urgent because the Federal Open Market Committee sounded hawkish last week. Hawkish means they might raise rates. Might. Goldman is selling insurance for a house fire while the homeowner is still shopping for matches.
The bank increased its uncertainty estimate. Uncertainty cannot be estimated. That's what makes it uncertainty. But Goldman ran the numbers anyway and concluded that nobody knows what short-term rates will do. Groundbreaking stuff. They could have saved everyone time and just written "we don't know" on a napkin.
Here's what happened. The Fed had a meeting. They said some words. Goldman's analysts heard those words and decided the words meant rates could move. Rates move every day. This is not news. This is not analysis. This is a Ouija board with a Bloomberg Terminal.
The hedges Goldman picked are probably fine. They're also irrelevant. If you need Goldman to tell you how to hedge rate risk after a Fed meeting, you shouldn't be trading rates. You should be trading baseball cards. At least those have pictures on them.
Retail traders will read this report and panic-buy inverse ETFs. They will not read the methodology. They will not understand the Greeks. They will see "Goldman Sachs" and "rate shock" and assume the sky is falling. The sky is not falling. Goldman just needs something to sell this quarter.
The best part is calling it a shock scenario. Shocks are unexpected. The Fed telegraphs every move six months in advance. They publish minutes. They do press conferences. Jerome Powell practically sends a calendar invite. Calling this a shock is like being surprised the sun came up.
Goldman made money writing this report and will make money selling these hedges to people who think reading it made them smart.
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