Could an early Fed rate hike be good for stocks?

2 portfolio managers say the market would welcome an increase before the expected time frame of next summer.

By MSN Money Partner Aug 25, 2014 12:45PM
Traders work on the floor of the New York Stock Exchange on April 30, 2014 in New York City. The Dow Jones industrial average closed at a new record high Wednesday after the Federal Reserve said it would reduce its bond-buying program
© Spencer Platt/Getty ImagesBy Matthew J. Belvedere, CNBC

As the great interest rate debate rages inside the Federal Reserve, two senior portfolio managers told CNBC on Monday that any accelerated start to normalizing monetary policy would actually be good for stocks.


Perhaps counterintuitively, the market would welcome a rate hike before the expected time frame of next summer.


"When the Fed eventually begins to raise the [federal] funds rate next year, that in our view is not the death knell of this rally," Federated Chief Equity Strategist Phil Orlando said in a "Squawk Box" interview. "The market is going to appreciate the fact that [that] . . . must mean the economy is starting to normalize for the first time in seven or eight years.


"That's good news for equity investors," Orlando added -- a sentiment echoed by Nuveen Asset Management's Bob Doll.


An earlier-than-expected Fed rate move would signal "the economy and earnings are getting better a little faster than previously thought," Doll said."Equities are going higher as long as the economy and earnings are growing."


He sees the economy growing 3 percent for the year. Orlando said he's focusing on second half GDP growth of 3.5 percent.


On Friday, stocks pushed higher as Fed Chair Janet Yellen expressed a dovish view on policy during her address to the central bank's Jackson Hole symposium. But she also said the Fed was getting closer to meeting its objectives, while outlining both sides of the economic debate on labor slack.


As the Fed gears up on rates, it's continuing to wind down the latest round of bond buying. At last month's meeting, policymakers reduced purchases by $10 billion to $25 billion a month, with a path to ending this quantitative easing altogether in October.


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14Comments
Aug 25, 2014 1:57PM
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it's ridiculous how the rates have been held down so long for so long WHILE the banks and corporations are flush with cash. 

Aug 25, 2014 4:13PM
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In the long term after the fall, not before.
Aug 25, 2014 3:59PM
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Could an early Fed rate hike be good for stocks?


Why Yes, Mr Belvedere......Yes, it could.

Aug 26, 2014 8:46AM
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In the history of the FED has a rate increase ever been good for the market?   Why would this time be any different?


For that matter when has the FED ever been right?   All they seem to be able to do now is feed bubbles...

Aug 26, 2014 2:27PM
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Yes of course it will. The Fed is going to wait until they see very strong growth in all sectors before they raise rates, but by that time it will be too late to stop an overheating economy, and we will have rising inflation, rates will start going up at an accelerated pace and next thing you know, recession. This is the recipe for every recession in the past 60 years, and you would think they know that by now, but I guess with a new Fed boss it's money 101 all over again. Too bad, because if they started raising rates now this recovery could last for years.
Aug 25, 2014 9:43PM
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The Fed has made stocks more important than every other aspect of economy and America. Raise the rates... the Hell with artificially inflated dead cat stocks. 
Aug 25, 2014 7:43PM
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The Central Banks are making a Assumption that they can controls things forever, they are wrong. When rates eventually do normalize, the Rate Hike will be far more then what the Markets can stand. This guy is telling us he can prevent that. Well when Gravity actually does take hold, not even the all Powerful Central Bankers can stop it.
Aug 25, 2014 3:48PM
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everything are good for stocks they shrug they ignore they optimistic they spin and all that jazz. how could they lose if everything are under their control.
Aug 25, 2014 4:17PM
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Well, nothing to complain, we were up 75 in the Dow and most importantly almost 10 in the S&P; now, if we compare it to earlier today when we were up about 125 in the Dow and about 14 in the S&P, it makes you think....Folks, manipulators will never go away and will always try to bring these markets down, doesn't matter where we stand, remember, they make their money by dropping us, by cheating and stealing from the rest of hard working Americans....Not a bad close today but, believe this, be very very careful tomorrow.
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