Tags: DeVere Group | Nigel Green | Investor | Fed | Rate Hike

DeVere Group CEO Nigel Green's Investor Checklist After Fed Rate Hike

Image: DeVere Group CEO Nigel Green's Investor Checklist After Fed Rate Hike
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By    |   Wednesday, 15 Mar 2017 02:30 PM

There are three key questions investors now need to ask themselves in the wake of the Federal Reserve’s interest rate hike, said Nigel Green, founder and CEO of deVere Group, one of the world’s largest independent financial organizations.

“This rate rise by the world’s defacto central bank confirms that we’re in a new era of higher inflation and higher interest rates. Investors will now need to position themselves accordingly," said Green, also a Newsmax Finance Insider.

The Fed raised its benchmark interest rate for the second time in three months and signaled that any further hikes this year will be gradual. The move reflects a consistently solid U.S. economy and will likely mean higher rates on some consumer and business loans.

The Fed's key short-term rate is rising by a quarter-point to a still-low range of 0.75 percent to 1 percent. The central bank said in a statement that a strengthening job market and rising prices had moved it closer to its targets for employment and inflation.

“Rates are beginning to normalize. While it may take a couple of years or so to get there, when they do the global economy will look very different to how it does today," Green said.

The message the Fed sent Wednesday is that nearly eight years after the Great Recession ended, the economy no longer needs the support of ultra-low borrowing rates and is healthy enough to withstand steadily tighter credit, the Associated Press reported.

The Fed's forecast for future hikes, drawn from the views of 17 officials, still projects that it will raise rates three times this year, unchanged from the last forecast in December. But the number of Fed officials who think three rate hikes will be appropriate rose from six to nine.

With this shifting landscape, Green said, investors now need to ask themselves three key questions: 

“First, is my portfolio truly diversified? Having a well-diversified portfolio is one of the fundamentals of successful investing, but alarmingly, and for a myriad of reasons, many investors are simply not adequately diversified. This puts them at risk and means they are likely to miss out on opportunities," he said.

“Being truly diversified across asset classes, sectors and geographical areas, and not trying to be too smart with sector or regional bets, is perhaps more important than ever," Green explained.

"The traditional interrelationship between sectors and regions has diminished since President Trump took office. A lot will be riding on which way the greenback heads and, crucially, which policies are green-lit by Congress," he said.

“Second, am I prepared for dollar swings? In the short term, higher Fed rates will attract overseas capital into the U.S., especially to those sectors, such as energy and financials, that will most likely benefit from Trump’s policies," Green said.

"On the flip side, emerging markets will become less attractive because a strong dollar makes interest and repayment more costly in local currency," he said.

“However, the strength of the dollar might weaken again in the coming months. The markets are pricing in three hikes in 2017 – I think it will be two, which would result in a fall back of the greenback later in the year," he said.

“And third, am I prepared for inflation? The American economy might not have a serious issue with inflation now, but we can be almost sure inflation is going to creep up on us," he said.

“Investors need to keep some powder dry in preparation for this time as their dollar-buying power will be hit when it finally arrives,” he warned.

“Investors who answer these questions honestly and then take affirmative action will find that they do not need to accept lower returns in this new era of higher rates and inflation.”

(Newsmax wires services contributed to this report).

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There are three key questions investors now need to ask themselves in the wake of the Fed's interest rate hike, according to the supervisor of one of the world's largest independent financial advisory organizations.
DeVere Group, Nigel Green, Investor, Fed, Rate Hike
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2017-30-15
Wednesday, 15 Mar 2017 02:30 PM
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