UBS published a note telling clients what to buy and what to avoid based on a jobs report that came out three days ago. The firm gets paid to do this. People pay them money for this service.
The August jobs report was strong. Strong enough that traders now think the Fed might hike rates instead of cut them. This represents a complete reversal of the consensus from two weeks ago when everyone knew with absolute certainty that cuts were coming. Those people still have jobs.
UBS says a rate hike creates trading opportunities across asset classes. They did not specify which opportunities or when or at what price. They did say to own some things and avoid other things. This is the entire value proposition. Own the good ones. Avoid the bad ones. Revolutionary stuff.
The report assumes the Fed will hike because unemployment dropped and payrolls beat expectations. It assumes the Fed cares about August data more than September data or October data or the data that will exist when they actually meet. It assumes the dot plot matters. It assumes forward guidance means something. It assumes Jerome Powell has a plan beyond reading the teleprompter and saying the word "data-dependent" until the questions stop.
Retail traders read this UBS note and immediately started rotating their portfolios. They sold the things UBS said to avoid. They bought the things UBS said to own. They did this at market open with market orders because urgency beats execution quality when you are trading based on somebody else's guess about what twelve people might do at a meeting six weeks from now.
The jobs report will be revised twice. The Fed will see three more reports before they meet. UBS will publish fourteen more notes with different recommendations. None of this will stop anyone from trading like the future is knowable and banks are oracles instead of salespeople with Bloomberg terminals.
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