The last time the U.S. Federal Reserve raised interest rates was almost 10 years ago, in June 2006. Since the financial crisis in 2008, the Fed has kept interest rates near zero. There is a possibility that the Fed may raise interest rates at their next meeting on December 16th.
What will happen if this is the beginning of ratcheting up interest rates to a normal price? Investments and securities that are interest-rate sensitive will begin falling in price. Many have started to already in anticipation of the December 16th announcement. These securities include bonds, bond funds, preferred stocks, utility companies, and anything else paying a fixed-rate return.
Reducing your exposure to these types of investments is the prudent financial move to make before the announcement. (If the Fed does not raise interest rates on December 16th, or it is a tiny amount, these securities may go up in value that day because increasing rates were priced-in already.)
The consensus view among economists that the Fed will raise rates has been wrong for a long time. This December could be another wrong guess. However, sooner or later, rates will rise and these securities will be negatively affected. What is your action plan to protect your portfolio if interest rates start rising?