NEW YORK (TheStreet) -- The Federal Reserve Open Market Committee announced that it was not changing Monetary Policy. Not surprisingly the Fed reiterated comments that while the committee members observed ongoing progress in labor markets, including early signs of some wage pressures, it was also aware of global disinflationary pressures and growth challenges.
All in all, it's hard to point to many surprises in the Fed announcement, as voting members of the FOMC are evenly divided between doves and hawks, with a slight leaning towards caution. Putting today's decision and market reaction aside, investors should ponder and focus on the following:
1. It's not the first rate hike investors should be worried about, it's the last one. Between 1970 and 2006, the Fed raised rates 26 times. In the two years following the first rate hike, the S&P 500 has risen 92% of the time (24 out of 26).
2. Low rates may be here to stay for some time. The Fed has been very consistent and has once again confirmed that it would take a very measured approach to changing interest rate and overall monetary policy.
3. From a fundamental perspective, and after a year of sideways trading, U.S. stocks are relatively attractive. Stocks rise and fall as a result of earnings growth, which of course is influenced by overall economic growth. Earnings are expected to rise to all-time highs in the fourth quarter of this year and in 2016.
Looking at the investment landscape more broadly and over a longer time horizon, investors should also recognize that over the next few years we will see an increasing divergence in monetary policy from major central banks. This will lead to further investment opportunities, both within the U.S. and abroad. As the Federal Reserve slowly moves to raise interest rates and plots a trajectory to "normalization," nearly all other major central banks, from the European Central Bank to the Bank of China are actively taking steps to spur growth in their economies, earnings and economic growth across the globe will also deviate from the recent high levels of correlation.
In the current environment, certain European large-cap multinational companies are very attractive, particularly in the energy space. For instance, Total S.A.(TOT) - Get Report , a global leader in the energy that generates more than 50% of its revenues from North-America, has a 6% yield, and Royal Dutch Petroleum (RDS.A) boasts a yield in excess of 8%.
Of course, there are also ample opportunities within the United States. Although they have recently underperformed, expect a resurgence for many high-quality dividend paying stocks. Large U.S. multinational companies, specifically those companies who are gaining market share from their competitors, have very strong balance sheets and have a history of paying and raising their dividends, offer attractive long-term value for patient investors.
While some market observers have shunned these stocks over the past few months, arguing that a strengthening dollar will continue to pressure earnings from multinationals, these concerns are overdone and that the U.S. dollar rally is largely done. Most significantly, after nearly a year of sideways trading, stocks are now more attractive than they were at this time last year. With valuations being more attractive and the historical perspective that election years are amongst the strongest performance years in market history, we expect high quality dividend paying stocks such as Merck(MRK) - Get Report , Southern Company(SO) - Get Report and CSX Corp(CSX) - Get Report will shine once again.
This article is commentary by an independent contributor. At the time of publication, the author managed funds that held positions in TOT, MRK, SO, CSK and RDSA.