NEW YORK ( TheStreet) -- Think a rate hike is coming in December at the latest? You might want to think again. 

The S&P 500 just finished its weakest quarter since the third quarter of 2011. While much of that was related to global concerns, especially regarding the Chinese economy, losses also stemmed from uncertainty over interest rate policy. The U.S. Federal Reserve held off on raising rates at its September meeting, but Fed Chair Janet Yellen subsequently said that a rate hike remained likely to occur in 2015. The increase would probably come in December.

The market currently has mixed feelings about the prospect of higher rates. On the one hand, the Fed has said it would raise rates when it deems the economy strong enough to withstand such a move. If the Fed thinks the economy is strong, that would be a plus for investor sentiment.

On the other hand, the Fed's low-rate policy has contributed to Wall Street's advance since the bottom of the financial crisis. Ending the current accommodative policy at a time when global growth remains uncertain could exacerbate market volatility, which has already been elevated of late.

With all due respect to Yellen, a December rate increase seems exceedingly unlikely given the current economic backdrop. Investors should expect the record-low rate environment to end in early 2016 at the very earliest, as well as a trading pattern similar to 2011, when the sharp losses of the third quarter led to a rally in the fourth.

There are a few reasons for this. No. 1: The timing of the December meeting will coincide with a number of uncertain events that could dictate market action. A government shut-down was just averted by the passage of a 10-week spending bill that expires Dec. 10. If another battle to keep the government open goes down to the wire, markets won't like it and neither will the Fed. It seems unlikely that the central bank would raise rates amid that kind of brinksmanship.


Last week, Treasury Secretary Jack Lew said the government would stop writing checks and paying its bills once it gets down to its minimum $150 billion cash balance, which many estimate will occur the first week of December. That means Congress will also be in focus as it votes on whether it should raise the debt ceiling, a once-routine process that has become partisan. Notably, U.S. Rep. Paul Ryan (R-Wisc.), chairman of the House Ways and Means Committee, has been critical of raising the ceiling. Uncertainty here will also not be taken well by markets.

It's unlikely that these issues will be resolved by the time the Fed prepares for its Dec. 16 meeting. But even if they are, late December is historically a thin period of trading. Investors are out on holiday, there tend to be fewer news events to trade off, and in general, there's less liquidity floating around. Raising rates in that kind of environment would amplify volatility unnecessarily. If the Fed can avoid turbulence by waiting just one meeting more, why wouldn't it?

So what does this mean for Wall Street? While growth is likely to remain uncertain this year - and volatility should remain elevated -- accommodative policies should help lift markets, even if the benefit has only been extended by a few months. Investors should also become more confident about the U.S. economy in particular if data continues to improve and the third-quarter earnings season comes in ahead of expectations, as expected.

This article is commentary by an independent contributor.