Not Your Grandfather’s Rate Hike
With the Fed funds rate set to rise for the first time after years of extraordinary and unprecedented monetary policy, we believe that market psychology will make for a difficult investing environment. This anxiety is compounded by the fact that these rate rises will not be, as they have usually been in the past, actions taken to cool off an overheating economy — they will be actions taken simply because without them, the Fed will have no ammunition in a future crisis. We anticipate a stock market correction in the lead-up to and aftermath of the first rise — but believe that after two or three months, the bull market could resume. Under these circumstances we would not own stocks for their yield, but would prefer, high-growth companies in such industries as healthcare, biotech, tech, and cybersecurity.
