Fed rate hike isn’t all ‘doom and gloom’ for stocks: JPM strategist

The potential for the Federal Reserve to raise rates in June appears to be spooking the market, but one market strategist says that stocks will likely rise in an environment that will lead the central bank to raise rates.

On Wednesday, the Fed released minutes from the April policy meeting in which it indicated that if the data continue to improve, it could raise its target federal funds rate as early as June. The announcement caused the S&P 500 and the Dow Jones industrial average to slide down into Thursday, showing the anxiety surrounding a possible move by the central bank.

But Gabriela Santos, global market strategist at JPMorgan Asset Management, says that if the economy continues to improve, stocks are set to do well no matter what the Fed does.

"If you just think about the underlying reason why the Fed would be hiking rates, it's because the economy's doing fairly well," she said Wednesday on CNBC's "Trading Nation." "Things are normalizing; as a result that could be a positive thing for earnings, for stocks, for general risk assets. It doesn't have to be doom and gloom."

Read MoreMarket's early reaction to a Fed June rate hike is NO!

Santos is especially bullish on the "cyclical" sectors that do best in an improving economy, such as consumer discretionary, financials and technology.

Currency strategist Boris Schlossberg agrees with Santos' take.

"This is the absolute right time for them to do a rate hike in June before the general election starts, before you have turmoil in the markets," Schlossberg, managing director of FX strategy at BK Asset Management, said Wednesday on CNBC's "Power Lunch."

"So I think what will happen here is you'll have this rate hike in June, and then another pause for six months. And that's probably going to create a much bigger calm than people think."

"Would it help financial stocks right now? Absolutely. Is it going to steep the curve for a bit? Absolutely. But I don't think long-term secular move by the Fed, by any means, this is just a one and done move to satisfy the markets," he said.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more