Last week was all about the Federal Reserve.
Janet Yellen, the Fed Chair, was expected to announce whether or not rate hikes would begin now, and if not, when that policy would be changing.
What the Fed finally came out and said should scare you, and here’s why…
By now you likely now that the Fed has decided not to raise interest rates just yet. After getting closer and closer to the point where rate hikes were an inevitable conclusion for the September meetings last week, August’s market falloff changed things.
That’s why I wasn’t surprised that the Fed decided to hold off on increasing interest rate.
What I was surprised about was the significant lack of clarity provided by Yellen and her colleagues…
Instead of telling us WHEN rate hikes could be expected, the Fed basically left that part of the equation – a very important part – entirely unclear. They’ve adopted a wait-and-see approach that has placed them firmly in the passenger seat.
And that could mean MORE volatility for Wall Street.
What should have been a bullish announcement (putting off rate hikes) turned into a “what now?” feeling for investors as they still have to deal with impending hikes hanging over their heads.
The long-awaited interest rates increases will remain in the back of every investor’s mind until they finally happen, and there’s simply no way to gauge the impact that will have on the market.
So how do you and I protect ourselves and keep profiting?
In light of this discussion, I’m looking at two basic principles that I’m sticking too unless there are some extraordinary circumstances…
1. Avoid market areas that are easily affected by interest rates, such as banks and many utilities.
2. Go with more predictable sectors that should benefit from a good jobs market and low oil prices, such as consumer discretionary stocks.
These 2 guidelines should keep us out of trouble and put us in position to continue profiting.
