Editors' pick. Updated from March 14 after the Fed's announcement that it will hold interest rates steady.
As expected, the Federal Reserve kept interest rates steady this week. And that could be a good thing for income investors.
Deutsche Bank analysts said they expect the next interest rate hike will be in June, six months after the initial liftoff from crisis levels in December.
"We believe the U.S. economy and especially its labor market will remain solid this year and now, given less risk of a euro plunge driving another dollar surge, we think it will be time for the Fed to hike again in June," Deutsche Bank analysts wrote in a March 11 note to clients.
"But let us be clear, we think the Fed should hike at a pace much slower and to a neutral level much lower than history," the note said. "We think the Fed should hike in June and not again until after the U.S. election in December. We think hikes this cycle should be spaced [four to six] months apart unless inflation becomes a clear threat."
Interest rate rises that are slow with modest U.S. dollar appreciation are good for the S&P 500, the analysts wrote.
"If the [European Central Bank] doesn't go more negative and the Fed communicates slow hikes, we think this relieves [foreign exchange] risk at big-cap multinational tech and health care stocks, which should boost their [price-to-earnings ratios]," the note read. "Some Fed hikes and a somewhat stronger dollar should keep inflation low and keep interest rates low, which should boost the S&P's P/E."