In Southwest Florida, advisers say increase expected, size taken in stride

Southwest Florida investment advisers and bankers aren’t shaken by the Federal Reserve Board’s decision Thursday to raise a key interest rate a quarter-point to 5.25 percent.

“Basically, they’ve only raised it 25-basis points for the past two years, so the market has gotten used to it,” said Bob Belcastro, Naples branch director of RBC Dain Rauscher, a securities firm. “A 50-point raise could’ve caused some consternation among investors.”

This is the 17th consecutive time the Federal Reserve has increased the federal funds rate, the rate banks charge one another, to control inflation.

Before the official announcement, media outlets and financial experts already concluded the Fed would raise the rate, but the question was whether rates would increase by a quarter or a half of 1 percent.

David Morgan, senior vice president of Raymond, James & Associates Inc. in Southwest Florida, said he has no “definite answer” for stockholders but to adjust their portfolios to the changing climate.

“What I tell them is to talk to their financial adviser to see what they should do,” he said.

He said he doesn’t expect another raise in August, when the Fed will meet again to determine whether to raise, lower or keep the same fed funds rate.

Belcastro said the market still has good stocks, but investors will have to do a little bit more to find the companies that are still earning money now.

Right now the best stocks to invest in are “defensive” stocks, which aren’t affected by rate changes, such as food and energy companies, he said.

An important point to keep in mind is that the Fed’s decision only affects short-term rates, Belcastro said. He pointed out that 30-year Treasury bond rates are now 5.25 percent, compared to 5.4 percent two years ago.

Promptly after the announcement was made, both the NASDAQ and the Dow surged up. Earlier in the day, the stock market also rallied with news of a fast-growing economy. But in the few days before the announcement, stock prices tumbled.

The interest rate increase will affect borrowers though. The prime rate, which is affected by the Fed, was increased to 8.25 percent after the Fed’s announcement Thurday.

“It’s causing individuals to consider to do a refinance,” said John Calabria, president of BancMortgage Corp., who is primarily based in Lee and Collier counties.

Calabria said that he advised clients to drop equity lines of credit months before the increase happened.

But Calabria isn’t concerned that rising rates will heavily affect the housing market because of the supply of homes in Lee and Collier counties.

“Another .25 percent increase isn’t going to stop them from buying a house,” said Calabria, who is anticipating one more rate hike.

In the time between now and August, Morgan advises to not become overly anxious about the stock market.

“The key is just because they raise rates, it’s not here forever,” he said.