The Fed has held the Federal Funds Rate at an artificially low level since the housing collapse. A rate increase is long overdue.
The Fed may not increase the rate before the elections for political reasons (What? Never!). However, they are under extreme pressure to do so, and may have to increase the rate sooner. All the signs suggest that the economy is on the right track and that inflation is relatively low. This is the perfect environment for a rate increase. If the Fed leaves it too late, inflation can be a runaway train and ruin everything.
When the rate is increased there is going to be some volatility, probably to the downside, to the value of stocks. You, as an investor, need to be ready with a plan now to cover the risk because a Fed rate increase in the near future is as certain as day follows night.
We have been in the dark for quite a while, dawn is on the horizon and it won’t be long before daybreak. When daybreak happens you need to protect yourself with some financial sunscreen in order not to get burnt. In part 2 of this article, coming soon, I will explain one of the best ways to protect your portfolio without losing a beat.