U.S. Markets close in 48 mins

5 ways rising interest rates could hit Main Street

It’s a cliffhanger, of sorts - Wall Street’s guessing game of whether the Fed will raise rates at their September 16-17 meeting. Policymakers also don’t seem to know what to do with short-term interest rates, according to seasoned Fed watchers.

“I do think that the Fed is most likely to delay an interest rate increase, so no change next week,” said Brian Rehling, co-head of Global Fixed Income Strategy at Wells Fargo Investment Institute (WFC).

Regardless of the exact timing of a rate hike, an increase is eventually on the way after nearly a decade at zero. Rehling is advising his clients, “now may be a good time to revisit your fixed-income strategy.”

Here are the the five ways Rehling expects interest rates to affect investors:

1. Investors with allocations in cash and cash alternatives could see returns for risk-free assets slowly move higher

2. Retirees and fixed-income investors may be able to take less risk to generate income from their portfolios

3. Investors are recommended to use caution regarding exposure to securities with long-term maturities as Wells Fargo expects longer-term interest rates to move modestly higher

4. Expect increased volatility in the equity market but growth should continue

5. Borrowing costs are tied to interest rates and are likely to increase when interest rates rise

Get the Latest Market Data and News with the Yahoo Finance App

Some investors like retirees and savers who have been hampered by the zero interest rate environment stand to potentially benefit from a rate hike. “They should be able to dial back the risks they’ve been taking over the last several years,” Rehling says.

The investment strategist is still bullish on equities despite the volatility. “We think long term, equities have more room to run here in the bull market as the economy should continue to expand,” he said.

“Equities, especially domestic large cap equities, they should continue in their bull market,” maintained Rehling.

More on Yahoo Finance

Silicon Valley feels the aftershocks of Wall Street's turbulence

Fed's decision won't rile the housing market: Fannie Mae economist

In a scary market, what exactly do investors fear?