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Buckingham: Don't Fear the Fed

Federal Reserve Chairman Janet Yellen holds a news conference in Washington December 16, 2015.
Jonathan Ernst | Reuters
Federal Reserve Chairman Janet Yellen holds a news conference in Washington December 16, 2015.

Stocks have been off to a fickle start this week after slashing morning gains early into today's trading session. At today's high, the Dow was up 143 points. After last week's Fed rate hike markets seemed a bit spooked, but AFAM Capital's John Buckingham says, "don't fear the Fed!"

"The Fed seemed to give the financial markets exactly what was expected: a quarter-point hike in the Federal Funds rate and dovish commentary surrounding the potential for additional interest rate increases in 2016 and beyond," John told CNBC's Power Lunch.

The day following the announcement however, investors had a significant change of heart and stocks sold off sharply. The financial sector especially took a hit, falling nearly 3 percent in the day following.

"We will not be surprised if we see additional near-term downside volatility, but we'll close this portion of our missive with the reminder that the markets have endured more out-sized declines than advances going back to the 1920s, yet the overall return on equities has been quite handsome… provided that investors remember that the secret to success in stocks is not to get scared out of them!"

AFAM Capital's John Buckingham is overweight in consumer discretionary stocks, while modestly underweight in financials, health care & utilities. John believes that the Fed will remain friendly for some time ahead, even though investors will fret over timing of the next rate move. According to AFAM Capital, "stocks have performed just fine, on average, in the six months following the initiation of a rate-increasing cycle."