The strategies of the two Wall Street giants converge: UBS and Goldman Sachs both promote consumer stocks + short interest in interest-sensitive assets

The Zhitong Finance APP noted that as U.S. stock investors shift their attention from easing trade tensions to the threat of rising bond yields, the two major trading departments on Wall Street suggest profiting from both trends simultaneously.

UBS Group and Goldman Sachs' strategy is a dual approach: buy consumer stocks, which are expected to continue outperforming the market as the Trump administration's tough rhetoric on lowering tariffs pressures retailers not to raise prices; at the same time, short markets sensitive to interest rates, such as housing, due to concerns over debt and the U.S. federal deficit pushing up U.S. Treasury yields.

The optimism surrounding the easing of trade tensions has reduced the uncertainty of a full-blown trade war, which could push the economy into recession and harm U.S. consumers. As the trade war de-escalates, the S&P 500 index has recovered losses since early April.

Meanwhile, U.S. Treasuries have fallen, and yields have risen, as concerns over the U.S. fiscal outlook have intensified with congressional negotiations including an extension of Trump's tax cuts.

Aaron Nordvik, UBS's head of macro equity strategy, wrote in a report to clients that if we receive more good news regarding tariffs and tax reform, there is still room for consumer stocks to rise.

On Wednesday, investor concerns over rising U.S. Treasury yields became apparent, as disappointing auction results drove bond yields to levels seen during the market crash in April, prompting investors to sell off U.S. stocks.

A basket of consumer stocks from UBS has outperformed the S&P 500 index, rising nearly 28% since April 8, while the benchmark index has increased by 17%. Goldman Sachs' basket of consumer stocks—particularly those aimed at low-income households—hit a new high on Tuesday.

Goldman Sachs data shows that the ratio of low-income consumer stocks to housing stocks has surged to its highest level since November 2023.

Louis Miller and Faris Mourad from Goldman Sachs' trading department wrote in a report to clients: "With falling oil prices and average gasoline prices nearing a three-year low, we believe low-income households have more disposable income to spend."

Daniel Kirsch, head of options at Piper Sandler, stated on the other side of the trade, "Given the performance of interest rates, shorting housing makes sense. If you don't get relief on long-term rates, the housing market will struggle to really perform."

U.S. Treasuries continued to decline on Wednesday, with 20-year and 30-year Treasury yields rising above 5%. The two-year Treasury yield, which is most sensitive to Federal Reserve interest rate policy, slightly rose above 4%.

Goldman Sachs' trading department wrote: "Rising long-term rates will simultaneously pose challenges for homebuyers as mortgage rates increase." Since mid-May, due to increasing market concerns that yields will remain high, a basket of U.S. housing stocks from UBS has fallen by 3.5%.

Stock options traders are also making similar bets. The cost of options protection for the Consumer Staples Select Sector SPDR Fund ETF to decline by 10% over the next month compared to the cost of betting on a 10% increase has fallen below its major moving average, indicating that investors are not worried about potential losses in the sector. Meanwhile, the 50-day moving average of a similar ratio for the SPDR S&P Homebuilders ETF has surged to its highest level since February 2024.

Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, wrote: "Investors are preparing for the continued resilience of consumer demand, especially for those stocks with upward momentum."