The Dow rebounded after a lower open, as investors absorbed the initial surprise of the Fed's discount rate hike. What can history tell us about where stocks will go—and where are the best sectors to invest in? Sam Stovall, chief investment strategist at Standard & Poor’s, discussed his outlook.
“What the Fed is saying is that ‘we’re taking away the training wheels and you’re back to pedaling on your own,’ which is what we were doing before,” Stovall told CNBC.
“So it’s not an attempt to slow down the economy, it’s just to allow the financial systems to get back to normal…It’s just a matter of time.”
Stovall said investors should not be afraid of being in equities after rate hikes.
“Certainly the returns over the coming 6 to 12 months will be more muted than they are traditionally during all cycles, and certainly a lot less than when the Fed is cutting rates, but it doesn’t mean that you want to be getting out of stocks altogether,” he said.
“And the sectors that do well tend to be surprising as well.”
Stovall said the technology sector tends to perform well after the rate hikes, while utilities were among the lower performers.
“Technology has the lowest debt exposure—a debt to equity median of 18 versus 123 for utilities,” he explained.
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No immediate information was available for Stovall or his firm.