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 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."
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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.
