US Consumer Price Index (CPI) data published Thursday supports the case that the Federal Reserve will likely “implement one more interest rate hike,” says the CEO of one of a financial advisory, asset management and fintech organization.
The prediction from Nigel Green of deVere Group comes “as September CPI inflation rises 3.7%, above expectations of 3.6%. US CPI is now up for four consecutive months. Core CPI inflation fell to 4.1%, in line with expectations.”
He comments:
“Taking into account the latest US CPI data, and the minutes from the most recent Federal Reserve meeting, which were published on Monday, we expect there to be one last 25 basis point hike at its two-day meeting beginning October 31. The Fed will be conscious of growing uncertainty of the trajectory of the world’s largest economy and the risks of overtightening – especially in times of growing geopolitical uncertainty; while at the same time, want to avoid complacency in the continuing battle against inflation.”
The deVere CEO continues:
“As a result, we expect that interest rates will still continue to remain higher for longer.”
Based on the assertion that interest rate hikes “are likely to be nearing an end, and high-interest rates are expected to continue, investors may want to consider rebalancing their portfolios.”
Nigel Green also mentioned:
“Financial institutions, such as banks and insurance companies, tend to benefit from higher interest rates as they can charge more for loans and earn higher yields on their investments. A portfolio allocation to financial services stocks or exchange-traded funds (ETFs) may be considered. The energy sector also benefits from a robust economy and high interest rates. It’s typically positively correlated with economic growth and tends to perform well in such environments. Certain segments of the consumer discretionary sector, such as automotive, housing, and luxury goods, can perform well when interest rates are high. Consumer spending can remain strong, particularly if the economy is healthy, and these industries can benefit.”
As ever, an investor’s best tool for “mitigating risk and seizing opportunities is to remain properly diversified and by working with an independent financial advisor.”
The FOMC since March 2022 has “raised its key interest rate 11 times, taking it to a targeted range of 5.25%-5.5%, the highest level in 22 years.”
Nigel Green concludes that they don’t think they’re “at the end of the hiking cycle just yet, even though we’re close, and rates will continue to be high, potentially impacting your investment portfolio.”