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Andy Yew: Thoughts On Dec Rate Hike & Sectors To Look Out For
Aspire, Investments, Thought Leaders | 09 December 2015
By: Vance Wong
Articles (74) Profile

With the next Federal Open Market Committee (FOMC) meeting just round the corner, we had managed to gather some thoughts about the possibility of a December 2015 rate hike from Andy Yew, an investment trainer with Daniel Loh Pte Ltd.

Paris Terror Attack & Fed Rate Hike

First of all, I feel that the US Federal Reserve’s decision to hike rates mainly depends on the US economy. Looking at the recent November non-farm payroll data, the US economy seems to be recovering decently well, so I think that rates would most likely be raised in December this year.

Next, the Paris terrorist attack would undoubtedly affect the global economy, at least not in the near-term. Thus I do not think that the rate hike will be delayed just because of this. Nevertheless, I think that there are two long-term impacts of France’s worst terror act.

Firstly, consumer confidence and tourism in France will be affected naturally. Consumer spending and tourism revenue would further weaken the European economy, possibly driving anaemic growth even lower.

Secondly, government would have to spend more on military and national security, which would undoubtedly cause pressure on growth as well in the mid to long-term. However, these are long-term impacts, which would not affect the very probably December rate hike.

Stronger USD: How Will It Affect US companies based in SG?

As expectations of a Fed rate hike to happen in December this year increase, the US Dollar had naturally appreciated. Furthermore, more funds will flow back to the US market as investors get potential foreign exchange gains and also higher in the US.

Nevertheless, even in a bull run, not every sector will do well. I think that the Real Estate Investment Trusts (REITs), property, commodities and energy sectors are quite weak right now. On the other hand, technology, health-care and financials are stronger.

Sectors To Look Out For After Rate Hike

After rates are raised, the financial sector would continue to outperform because of the better interest rates. This will generate more profits for the banks in particular, while also increasing economic activity, which is good for the general economy.

Securities or investment firms would tend to benefit from this as well. The increased interest rates also means higher volatility, which equates to higher trading volume as well.

Investors’ Takeaway In A Bad & Unpredictable Market

When the economy is not doing well, our investment philosophy revolves around adaptive investing or also known as trend following. We would basically “listen” to what the market is telling us by looking at trends and adapt accordingly.

The main idea is to pick the outperforming stocks despite a bear market or weak economic statistics. This kind of stocks are usually fundamentally strong stocks that can withstand a market downturn or even a recession.

Top fund managers typically use this strategy to manage large portfolios because it is less risky. Alternatively, we can also take short positions in times of a bear market. In a nutshell, when the market is unpredictable, being able to read trends and take short or long positions depending on the trend, are the most important skills to equip yourself with.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

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