With the Federal Reserve poised to pull the trigger on an interest rate hike next month, investors need to prepare themselves for potential market disruptions, according to James Bianco, President of Bianco Research. Bianco made his comments at Camp Kotok, an annual gathering of economists and money managers in Maine. ‘There’s a lot of dangers because this is a new thing that they’re going to do,’ explained Bianco. ‘The Fed is now eventually going to get rid of quantitative easing, lift off of zero. No one’s done that before.’ Bianco said the Fed will be using tools created as a result of the financial crisis, and the mechanisms have never been used before. ‘Now the Fed will tell you, we’ve modeled that. We’ve got it all figured out,’ he said. ‘I have spread sheets too. But the fact of the matter is, it’s never been tried. So the risk is when they go to raise rates, the markets don’t respond as we expect them to.’ The Federal Reserve meets to consider a rate increase in mid-September.
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