August continues to be a tumultuous month with the S&P 500 and Dow getting crushed during trading Thursday. There are a number of factors impacting market volatility as of late, but the number one worry weighing on investor’s minds remains the Fed.
As I’ve mentioned many times before, I do not believe the Fed will raise rates any time soon because the economic data is not up to expectations. In fact, last week, Stanley Fisher, the Vice Chairman of the Fed reconfirmed that the Fed can’t raise rates because there’s no inflation. The requirements that the Fed has is that the U.S. economy has to have good job growth and inflation before raising rates. If the Fed raises rates too soon, the U.S. runs the risk of deflation. And while this fact hasn’t showed up in indices yet, I believe it’s coming. The recent drop in commodity prices fall is a telltale sign and we are, if anything, teetering on deflationary environment here and we do not want the Fed to raise rates in September.
So, if the Fed is planning on a rate hike, it won’t be anything too drastic and most likely won’t happen till later on in the year; a one and done kind of deal. That’s something Janet Yellen has made very clear; that the Fed doesn’t intend to raise rates dramatically.
I recently discussed this exact topic with my Blue Chip Growth subscribers. And while I’m not worried about rate hikes at the moment, that doesn’t mean there aren’t precautions that investors can make.
There are stocks that I like to deem Fed Proof. These stocks are fundamentally strong, have solid growth and have proven to remain strong despite an unusually volatile market. ULTA Salon Cosmetics (ULTA) and Allergan PLC (AGN) are two stocks that I’m comfortable with for the long-term. Both stocks are A-rated Strong Buys in Portfolio Grader and have had an exceptional year in terms of growth.
For further information about more Fed Proof stocks and for more analysis on the Fed, please visit my Blue Chip Growth website.