US Markets

With Fed on hold, June volatility looms

US equities look fairly priced: Pro
US equities look fairly priced: Pro

Traders may be happy now that the Federal Reserve held back on rate hikes, but come June, markets could see volatility all over again, and investors need to prepare, strategists said Thursday.

"We're recommending clients sell some of their exposure, add some protection and think about looking at dividend strategies if the Fed's going to be slower than expected," Steven Rees, global head of equity strategy at JPMorgan Global Wealth Management, told CNBCs "Squawk Box."

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On Wednesday, the Fed cut in half its expectations of interest rate hikes for 2016 from four. It also lowered its economic growth outlook to 2.2 percent for the year, down from 2.4 percent.

U.S. equity markets closed higher after the announcement, but premarket futures edged lower Thursday.

While Rees doesn't see a recession on the horizon, he is still looking to options like short-term puts for protection against other risks like volatile oil prices, tough corporate earnings, U.S. interest rates, and negative interest rates in Europe and Japan as the June earnings season and Federal Reserve meeting approach.

Did the Fed send a signal to buy stocks?
Did the Fed send a signal to buy stocks?

U.S. corporate earnings growth, a major driver of stock performance, could be problematic, as employment and wages rise, adding costs for business owners, said Jim Cahn, executive vice president and chief investment officer at Wealth Enhancement Group.

"Those wage increases are going to put pressure on businesses and profits, and ultimately, put pressure on the Fed to increase interest rates faster," Cahn said.

With manufacturers struggling worldwide, emerging markets look more attractive than the U.S., he said.

"Especially in emerging markets, the story doesn't get much worse than it is right now — and generally that's a good time to buy," Cahn said.