01 Nov

Fed expected to hold rates steady – what investors should do now

November 1, 2023

By George Prior 

The Federal Reserve will almost certainly hold interest rates steady for the second meeting in a row today at the highest level in some 22 years.

This would support expectations from deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations, of a year-end rally in 2023.

It also means that most investors will need to revise their investment portfolios.

The analysis from Nigel Green, deVere Group CEO and Founder, comes ahead of the US central bank’s Big Decision on interest rates at 2pm ET (7pm GMT).

He comments: “The markets will be buoyed by the Fed not raising rates as it means we’re nearer to the end of the most aggressive rate-hiking programme in generations.

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“But the markets have already fully priced-in this Fed decision, so we don’t expect it to send stocks skyrocketing on this news alone.

“However, the Fed holding rates steady again does add fuel to our expectation of a 2023 year-end rally.”

On Tuesday, the deVere CEO told the media: “History shows that November is the second-best month of the year for markets, behind April.

“This November could be even more positive as some markets are currently in correction territory – falling by more than 10% – and so a swing to the upside will be more pronounced.

“Over 72 years there have been 34 market declines. Only 12 of these have turned into bear markets. When does a recovery typically happen? 96 days after the start of the correction. We’re now around day 90.

“If all this data holds up, we’re about to see a year-end rally, which investors would not want to miss out on.”

While the Fed may be done hiking, there is a wider expectation that they’re going to keep rates higher for longer.

As interest rates are anticipated to remain elevated for an extended period and a year-end market rally is expected, investors must adopt a prudent approach to navigate these evolving financial landscapes.

To thrive in such conditions, Nigel Green suggests five important strategies that investors should consider.

“First, maintain a well-diversified portfolio that spreads risk across various asset classes. Diversification can help mitigate the impact of rising interest rates and market volatility.

“Second, evaluate your risk tolerance and investment goals. Ensure that your portfolio aligns with your financial objectives, and consider adjusting your asset allocation accordingly.

“Third, given the potential for higher market volatility, active management can be valuable. Reassess and rebalance your portfolio as needed to capitalise on opportunities and manage risks effectively.

“Four, explore fixed-income investments that are less sensitive to interest rate changes, such as short-term bonds, structured notes or inflation-protected securities.

“Five, keep a long-term perspective and avoid making impulsive decisions based on short-term market movements. Stick to your investment strategy and avoid trying to time the market.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of offices across the world, over 80,000 clients and $12bn under advisement.

 


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