Fed won't kill our rally in December: Asset manager

See equity rally into new  year: Partner
See equity rally into new year: Partner

It won't be just the shopping malls and retail outlets that will see increased spending this Christmas, with one asset manager predicting a stellar year-end rally in equities despite the U.S. Federal Reserve's expected hike of its benchmark interest rate off record lows.

Beat Wittmann, a partner at financial adviser Porta Advisors, told CNBC Tuesday that historical evidence on rate rises will be overlooked and investors will spend the holiday period loading up on their portfolios.

"It's good to get this (Fed rate hike) out of the way and I think we have a rally here continued into the new year," he said.

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If the Fed does decide to move at its December meeting, it'll be exactly seven years since it pushed its Fed funds target rate down to 0.25 percent following the global financial crash of 2008. After three different quantitative easing programs, it now looks to be the only central bank willing to normalize its policy amid more easing from the likes of China and the euro zone.

A bumper U.S. employment number on Friday only added to the belief that Janet Yellen and the Fed members will act before the end of the year.

"I think it will be very positive for markets if (the Fed) they could move on," Wittmann added. He believes that any hike in December would be "small" and predicts rates will remain at a "really low level" for at least the medium term. He added that he was a fan of financial stocks - on both sides of the Atlantic - in this current environment.

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Economists and analysts have been spilt on how global asset markets will absorb a rate hike after brief sell-offs in the last year on positive data or on hawkish comments by a member of the Federal Reserve. Equity markets in the emerging world have been particularly affected by the speculation.

A rate rise would traditionally lift the dollar. But, a strong dollar would affect companies in the U.S. that are reliant on exports. Analysts have also spoken of the higher cost of borrowing if the U.S. benchmark interest rate is higher.

Earnings at major companies would also be hit if they have to spend more money to service larger yields on their debt. Peter Toogood, investment director at City Financial Investment Company, told CNBC last week that price-to-earnings ratios - an important metric used by equity analysts to gauge the value of a stock - will start to contract if the Fed hikes.

"Monetary tightening never is particularly auspicious," he said. "This is at a point where the earnings season in the U.S. has been pretty poor actually."