UBS Names Three Places to Put Money as Fed Rate Hike Odds Reach 60%

UBS strategists highlighted three asset categories for investors as market volatility rises ahead of the Federal Reserve’s September policy meeting. The bank withdrew its short‑term bond recommendation, emphasizing that the underlying economic conditions driving any rate decision are more important than the decision itself.

Key Economic Context

Recent U.S. labor data showed non‑farm payrolls increasing by 162,000 in August, well above expectations, while unemployment remained at 4.1%. This strong employment report has pushed the probability of a September rate hike to about 60% according to CME FedWatch, with odds rising for later meetings.

UBS Asset Allocation Outlook

1. Equities

UBS suggests allocating to equities first, provided earnings outlooks remain solid. The bank favors sectors such as artificial intelligence, power, resources, and companies with long‑term growth potential.

2. Medium‑to‑Long Yield Curve

Higher yields have created more attractive entry points on the medium‑to‑long end of the bond curve, offering both income and diversification benefits.

3. Gold

Gold is positioned as a portfolio hedge and diversifier rather than a short‑term tactical play. While higher real rates and a strong dollar present near‑term challenges, persistent inflation and fiscal concerns could support gold’s appeal.

Additional Guidance

UBS advises reducing excess dollar holdings due to the currency’s strength and no longer recommends short‑ to medium‑duration bonds as a cash alternative.