Fed Meeting Suggests One Or Two Rate Hikes This Year

This week's Federal Reserve meeting served as confirmation for investors that the bank is still planning to raise interest rates some time before the end of this year.

Although the bank has promised to take a slow-and-steady approach to policy tightening, investors are beginning to batten down the hatches for fear that the hike will have a dramatic effect on markets.

Labor Key

On Wednesday, Fed Chair Janet Yellen remarked that the rate increase would be closely tied to labor market data, saying that improvement in that area of the economy was the number one driver of the bank's decision making.

Weak economic data at the start of the year had many questioning whether or not the economy would be strong enough for a rate hike, but Yellen suggested in the press conference following the meeting that data shows the nation is on track for one or two rate increases before the year is out.

When?

Most investors have placed their bets on a September rate increase, though upcoming jobs data will likely play a role in analysts' predictions.

Although the bank is likely to tighten before the end of the year, Yellen has promised that the bank will move slowly and gradually so as not to upset markets.

How To Prepare

Many worry that a rate rise will push stock values lower and wreak havoc on the bond market. While its difficult to tell who the winners and losers will be when markets absorb the Fed's next move, many investors are rushing toward commodities as they are historically unaffected by policy changes.

Another good bet for investors looking to avoid a slide in their portfolio is foreign assets. As the dollar (UUP, quote) rises following policy tightening, foreign goods gain popularity which will be that will beneficial to companies in Europe and Asia.

On the other side will be US companies who have borrowed large sums to conduct share buybacks and increase dividends. The age of improving returns for shareholders is likely nearing its end as borrowing costs rise.

Content courtesy of Benzinga written by Laura Brodbeck, Benzinga Staff Writer