Why I Like the Fed Move

I’ll cut right to the chase. I think small cap stocks have 15% upside in 2016. And that means we should have ample opportunities to make much more with rapid growth pure-play small caps.

Why am I so bullish when the market hasn’t done anything for a year?

Because for the first time in 9.5 years (since June 2006), the Fed raised interest rates. The scant quarter percentage point hike is likely to be just the beginning, as interest rates still remain historically low (the move is not expected to move long-term rates much in the near term, but will move short-term rates).

I like the move. While I don’t pretend to understand all the variables going into the decision, from 10,000 feet, it seems overdue. The U.S. economy is strong enough to handle it. Conditions that have validated rate increases in the past more-or-less exist today. And, perhaps more importantly, I think the market has wanted this since September. So it’s good to have one less question today than we had yesterday. The market doesn’t like uncertainty.

There are issues of diverging policy around the globe, and oil’s slide does raise eyebrows. But stepping back from all that, this small move signals that the Fed believes the financial system and economy are strong enough to handle all the money movement that will accompany a hiking cycle. A ton of non-interest bearing QE-related cash is now likely to seek yield. And I think a healthier economy will emerge when there are options for investors, besides just stocks that can generate returns.

Tyler Laundon is Chief Analyst of Cabot Small-Cap Confidential. To read subscriber reviews of Cabot Small-Cap Confidential, click here.

This is an excerpt from Cabot Small-Cap Confidential, which features little-known stocks with big potential. It offers a limited number of subscribers the opportunity to discover overlooked, low-priced stocks that have the potential to skyrocket. This advisory is best suited to experienced investors who embrace volatility.

Headline News

Stock Picks

Tesla Motors

If Tesla ever begins to cut back on development and innovation costs, earnings will soar.


China seems to be raising up its very own version of Amazon in Alibaba (BABA.


Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

Cabot Wealth Advisory

What Fed Speeches Mean for the Stock Market Today

By Chloe Lutts Jensen on September 29, 2016

Four Fed presidents gave speeches yesterday, and every word was digested by the stock market in an attempt to better predict the Fed’s next move. With odds of a December rate hike now about even, how should stock investors prepare?Read More >

The Emerging Market Stock You Ought to Own

By Paul Goodwin on September 27, 2016

The company I’m talking about (the one that you probably don’t own) is the largest Chinese instant messaging company. It is a giant in its own right, with a market cap of $262 billion and annual sales of over $19 billion. The company grew revenue by 28% in 2015 and routinely boasts after-tax profit margins over 30%.Read More >

Tesla Model 3 vs. Chevy Bolt: Which Affordable Electric Car Is Better?

By Timothy Lutts on September 26, 2016

The Tesla Model 3 and Chevy Bolt are the first two affordable electric cars with a driving range of more than 200 miles. Let’s see how they stack up - and what they could mean to Tesla Motors (TSLA) and General Motors (GM) stock. Read More >