5 Utility Stocks To Gain From Fed's No-Rate-Hike Decision

Investors heaved a sigh of relief as most of the central bank officials favored to end the runoff of the Fed’s balance sheet this year. The Fed also expressed uncertainty over raising rates further in 2019, going by the minutes of its January meeting.

The Federal Open Market Committee’s (FOMC) Jan 29-30 meeting showed that almost all participants thought it would be ideal to stop reducing the Federal Reserve’s asset holdings later in 2019. The Fed’s dovish position on further rate hikes, by the way, makes it sensible to invest in dividend-yielding stocks such as utilities, which could thrive in a no-rate-hike scenario.

Interest Rates at Bay

A gauge of encouraging economic factors such as strengthening labor market conditions, a low unemployment rate, strong gross domestic product growth and inflation near the 2% target were taken into consideration by Fed officials as they expected sustained growth, the minutes revealed.

In addition, Federal Reserve Chairman Jerome Powell had stated on Jan 30 that the Fed would be patient when it came to altering its monetary policy. The Fed took into account economic headwinds that could be potential risks for the U.S. economy such as slowing growth in Europe and China, U.S.-China trade negotiations, the United Kingdom’s exit from the European Union and the five-week-long federal government shutdown. The Fed concluded that stagnating further rate hikes posed fewer risks to a strong economy.

The encouraging domestic economy and an uncertain global economic outlook are the major reasons behind the Fed’s decision to hold its gradual rate hikes.

Utilities Could Gain From Fed’s Dovish Stance

Utility companies could reap significant gains from the Federal Reserve’s decision to leave rates unchanged this year. This is because the borrowing costs of these companies will remain constant in the near future, thus helping them to avoid incurring additional costs on their expensive business models.

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