Investors should position themselves by assuming the Fed will raise rates, says Robert Johnson of the American College of Financial Services. Fred Katayama reports.
Volatile day on Wall Street stocks went out of gas after floor accelerator at open. Joining us with analysis as Robert Johnson he's presidency of the American culture of financial services. Welcome Robert just spoke to hire right at the open after China. The government there's that philippoussis infrastructures. For the fiscal policy. Is just a few hours you know. I think it's that the China fears. That the crisis it is sure in the market and I think we go from crisis to crisis you remember a few weeks pet back it was Greece. And everybody was concerned with Kris and I think people are concerned with China but also think. That there's fed fatigue. And that people are really waiting for the fans act and I think that once there's more clarity. I think that the market can regain a direction. But you know the Dow its in its earlier it's one point gain much oh waste is behind it all this. I think that the volatility as market searching for direction here loosing interest and take an eye on the markets which I think it's interesting. Is that markets really haven't been that volatile in a long term sense they've been very volatile day to day. But they haven't been that while the long term would actually in a pretty narrow trading range if you were Rip Van Winkle. And you fell asleep at the start of the year and you woke up today the markets off 6%. Well that's a fairly normal trading range but it just week there volatility Robert trading range we were in front of me. I I I actually believe that there's a lot of truth to that I think people. The market didn't really abhors uncertainty that's true and I think that's what we're seeing now is that the market is is is was waiting for clarity. And I truly believe that the Fed would be well advised. To simply do any 25 basis point rate hike. And get it get overly. Because it's going to happen it's not a matter of if but it's. Worth let me next Thursday but what extent is the rate hike ice and stuff so. I think the rate hike is already priced into stocks not perhaps not a rate hike next week at a rate hikes certainly in in the near term is is already priced stocks that you're an expert on the Fed in terms of. What impact that moves happen on other markets. What sectors stand to win or lose if we get a race. Equity sectors that stand to win our sectors that sell necessities its energy utilities. Food. Those are the sectors in the past have performed the best when the Fed has been hiking rates. Those sectors that typically performed the worst are those that sell discretionary it's. Autos durable goods itself where people delayed those purchases when money becomes the year by Robert what happens there's no. I think that. Increasingly. The market use it it is becoming incredibly impatient with. And again I think you're gonna see a continuation. It is bouncing around in the trading range. Until there's some clarity from the fan and how should the average investors positioned themselves going into the yeah I think that I think you go into it. With the assumption that the Fed has raised rates. And I think sector rotation rotating from some of those sectors that typically do well when rates are falling. Two sectors that do well when rates are rising is a good strategy other asset classes five ways that have done well. During fed rate hikes which I think people wouldn't think with the case for instance is emerging markets emerging markets have actually done better. In the past 25 years when the Fed has been hiking rates and win the Fed has been lowering its. Really good outrage. And commodities also done better during a rising rate environment so. I think. When you look at the data. That date it. Often times contradicts conventional wisdom. We shall see what that's what it's going through her thank you. Our thanks to Robert Johnson of the American college of financial services I'm Fred Katayama this is Roy.