US keeping rates on hold is an opportunity for investors

There'll be no US interest rate rise this year, reckons Jim Cielinski, fixed income head at Columbia Threadneedle, after US Federal Reserve keeping interest rates on hold on Thursday. “We’re looking at 2016 now for the first increase in rates,” he said.

David Lamb, head of dealing at forex specialists FEXCO agreed. “The prospect of a rise before the end of the year, which had almost seemed a sure thing, is now riding off into the sunset,” he said.

Many experts had predicted the first hike in rates for a decade but the US financial authority decided to leave the Federal Funds rate unchanged at 0.25 per cent, citing recent global developments and their potential impact on inflation.

By doing so the Fed is fuelling market uncertainty, but that gives opportunities for investors, said Nigel Green, chief executive of deVere Group. “With the Fed, the world’s de facto central bank, keeping interest rates at historic lows, it is itself fuelling more uncertainty in global markets than if it had raised them,” he said.

Mr Green believes despite the volatility created by uncertainty around the Fed’s actions, there remains a significant amount of potential upside that investors an tap into.“Equity valuations appear to be fundamentally sound, so any China or US rate-related volatility is perhaps worth taking advantage of where possible,” he said.

However David Zahn, head of European fixed income at Franklin Templeton said that there could be more opportunities created for investors when rates do rise.

“We don’t think the timing of any rate rise in itself, whether it’s in December or early next year, should be a concern,” he said. “When it does happen, we would expect some nerves in the market which could create opportunities.”

Tom Stevenson, investment director at Fidelity Personal Investing pointed out that the Fed has just two more meetings in 2015 to start raising interest rates, adding to the growing view that it is now likely to be delayed until next year.

“Sitting on its hands it showed that it needs more time to gauge the impact of China’s deflation-exporting slowdown and the market turmoil that spooked investors in August,” Mr Stevenson said. “This caution today makes it even more likely that interest rates will remain lower for longer than many expected until recently.”

He said the move –or lack of a move – could be a sign that it’s a good time for investors to look at assets that can offer a combination of income and growth. “Dividend paying stocks, corporate bonds and real estate all provide investors with the prospect of a yield that will continue to remain elusive for cash savers,” he said.