With the Federal Reserve expected to hold interest rates steady in the first half of 2025, Nigel Green, CEO of deVere Group, advises investors to exercise caution and consider adjusting their portfolios accordingly. This guidance comes in the wake of continued inflation pressures, a strong U.S. labor market, and fiscal policies planned by President-elect Trump’s administration, which are likely to prevent the Federal Reserve from cutting rates in the near term.
Despite previous market expectations of a rate cut by the Federal Reserve, possibly as early as December, recent data indicates that persistent inflation is a major concern. The US Consumer Price Index (CPI) for November indicated an increase to 2.7% over a 12-month period, an increase from October figures, and core inflation remained at 3.3%. These statistics highlight current price pressures, suggesting that inflation is not as controlled as previously thought, which in turn could limit the Federal Reserve’s ability to implement looser monetary policies.
The strong US labor market adds to the complexity, with unemployment rates near record lows and wage growth potentially keeping inflation high through 2025. Green says: “We are entering a phase in which inflation remains a persistent threat and interest rates are unlikely to fall.” fall as quickly as markets expected.” It highlights the need for investors to prioritize quality assets, build inflation-resistant positions and adopt a more defensive investment strategy.
Green also points to growing market pressure on the Federal Reserve to ease monetary policy to support economic growth. However, he warns that policymakers must avoid a further rise in inflation, especially with President-elect Trump’s proposed agenda, which could include tax cuts, deregulation and major infrastructure spending, which is expected to boost inflation in the next few months.
Green outlines four key considerations for investors during this time. He suggests looking for opportunities in the bond market, stating that fixed income assets, such as long-term government and corporate bonds, can offer stable returns. He also advises focusing on quality stocks, particularly companies with strong balance sheets and proven pricing power, to withstand higher borrowing costs and inflation.
Diversifying into inflation hedges is another strategy Green recommends. Assets such as gold, gold and commodities could serve as essential tools for portfolio protection, and dividend-paying stocks could provide consistent income streams to combat the erosion of purchasing power due to inflation.
Finally, he advises minimizing overexposure to sectors that rely heavily on cheap debt, such as technology and growth stocks, which could face challenges if rates remain high. Instead, he suggests prioritizing sectors that typically benefit from inflation and steady economic demand, such as energy, utilities and healthcare.
Green concludes by emphasizing that strategic investors will take advantage of this period to reposition themselves for a new reality where caution, vigilance and adaptability are key.
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