Federal Reserve expected to maintain interest rates in early 2025, caution advised due to inflation

From Investing.com: 2024-12-17 06:58:26

The Federal Reserve is expected to maintain interest rates in the first half of 2025, prompting deVere Group’s CEO Nigel Green to caution investors on adjusting their portfolios due to inflationary pressures, a strong US labor market, and expected fiscal policies from the incoming administration.

Despite market expectations for a rate cut, recent data shows rising inflation concerns, with the US Consumer Price Index reaching 2.7% over 12 months and core inflation at 3.3% in November. These figures suggest ongoing price pressures that could limit the Fed’s ability to implement looser monetary policies.

The robust US job market, with low unemployment rates and potential wage growth, may keep inflation high into 2025. Green warns of persistent inflation threats and advises investors to prioritize quality assets, build inflation-resistant positions, and adopt a defensive investment strategy.

Green highlights the pressure on the Fed to ease monetary policy for economic growth but warns against increasing inflation, especially with President-elect Trump’s proposed agenda likely to boost inflation. He recommends considering bond market opportunities and quality equities to withstand inflation and higher borrowing costs.

Diversifying into inflation hedges like gold, real estate, and commodities, along with dividend-paying stocks, could protect portfolios from inflation erosion. Green advises minimizing exposure to sectors reliant on cheap borrowing and prioritizing those benefiting from inflation, like energy, utilities, and healthcare.

Strategic investors are urged to reposition for a new reality where caution, vigilance, and adaptability are crucial. Green’s guidance aims to help investors navigate the current economic landscape successfully.



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