The Federal Reserve is all but guaranteed to announce Wednesday that it will once again raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.
Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.
The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). That followed two smaller rate hikes earlier this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.
The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.
What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes (HESAF) and cosmetics giant L’Oreal (LRLCF).
