What should US stock market investors do before the Fed’s rate hike decision? | The Financial Express

What should US stock market investors do before the Fed’s rate hike decision?

The U.S. central bank begins its critical two-day meeting on September 20, and on September 21, it is expected to raise interest rates by another 75 basis points.

What should US stock market investors do before the Fed’s rate hike decision?
Fed Chairman Powell is committed to decreasing inflation for which interest rates will need to be increased more quickly and higher than originally projected.

US stock market investors may witness an increase in the volatility of share prices. With the US Fed ready to announce the rate hike on September 21, the traders and investors look forward to heightened action on the stock exchange terminals. If history is to be believed, September has never been kind to the investors. In the past, both February and September have been bad months for the stock market, but September is typically worse.

“Investors should avoid panicking about the imperfect Federal Reserve’s next announcement and stick to basic investment fundamentals,” says Nigel Green, CEO, deVere Group, one of the world’s largest independent financial advisory, asset management, and fintech organizations.

The U.S. central bank begins its critical two-day meeting on September 20, and on September 21, it is expected to raise interest rates by another 75 basis points. If it happens, then it will be the third consecutive rate hike of 75 bps by the US Fed.

Also Read – US Fed Meeting: How big will be the September rate hike?

The gains registered from the June lows are almost wiped out by the market. “Last week markets were in tumult and now in a wait-and-see pattern as they look for direction,” Green says.

Fed Chairman Powell is committed to decreasing inflation and in order to slow down price rise, interest rates will need to be increased more quickly and higher than originally projected. In doing so, there is a direct impact on the economy and the growth rate may weaken.

Also Read: US Fed’s September meeting is different and crucial for the stock market

“While some of this expectation will ‘already be priced in by the markets, it is also likely to generate uncertainty – which markets loathe – and this, of course, can create mass anxiety amongst investors. Of course, investors should avoid complacency, but similarly, they should avoid panicking and responding to the market reaction that is being driven by imperfect Fed policy tools,” suggests Green.

So, what should the investors do before and after the Fed’s interest rate decision? Green says, “Investors should look to allocate cash to risk assets – thereby following the adage ‘to buy when others are fearful’ – while remaining well diversified by asset type as well as sector and geography.”

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