Yellen Means It This Time on Rate Stance, Voya’s Cavanaugh Says

  • Companies issuing debt are ‘getting while the getting is good’
  • Cavanaugh sees banks benefiting from higher interest rates

Federal Reserve policymakers, who have been flirting with the idea of raising rates for months, are increasingly likely to follow through, said Voya Financial Inc.’s Karyn Cavanaugh.

“This time, it looks like Janet Yellen means it,” Cavanaugh said of the Fed chair in a Bloomberg Television interview Friday, adding that the possibility of higher rates has been encouraging corporate borrowers to issue more debt. “They’re getting while the getting is good.”

Yellen is scheduled to speak this afternoon at an event in Massachusetts. Investors and traders are eager for visibility after the minutes of the Federal Open Market Committee’s April policy-setting meeting showed that the central bank may be getting closer to another rate hike in the coming months, after an increase in December.

Cavanaugh, who oversees $820 million as a senior market strategist at Voya’s asset manager, said she doesn’t think the Fed increase will be as early as next month, while noting “we’ve seen this story before” where the central bank sends mixed signals.

Higher rates could help financial companies, especially banks, she said. Cavanaugh favors consumer discretionary stocks, saying they have become more attractive after a recent slump. The industry lost 0.4 percent in May through Thursday, compared with the gain of more than 1 percent in the S&P 500 Index.

“That’s probably a good play,” she said. “The way it always works is the pendulum swings too far, and then investors realize that, ‘Oh wait, I think I missed a good bargain here.’ "

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