Originally published in The Street

By Debra Silversmith

Markets hate uncertainty.

Federal Reserve Chair Janet Yellen seemed to forget this maxim last week, as the Fed decided to do nothing, standing pat on interest rates and setting the stage for more uncertainty in coming months.

The decision, or rather indecision, heightened jitters in already nervous stock, bond and currency markets around the world, even though many bankers, traders and economists had been split on whether the Fed would move.

Why all the angst about interest rates, especially if inflation has been below the Fed’s target and wage growth has been somewhat underwhelming or worse?

China. In her remarks after the announcement, Yellen noted “heightened uncertainties abroad” as justification for not taking action.

Slowing growth in China has rippled out across other economies, putting pressure on global commodity prices, which in turn have reduced inflation. The Fed now expects inflation won’t hit the 2% target before 2018.

Moreover, the focus on China — about whose economic statistics many observers have long had doubts — suggests that the policy-setting Federal Open Market Committee may have reacted to recent concerns voiced by the International Monetary Fund and the World Bank about a U.S. interest rate increase.

The biggest uncertainty, however, is not about when the hike will happen or how much China’s economy might slow. No, it’s about if the U.S. economy can withstand China’s woes without maintaining a zero interest rate policy.

I believe it can. Or, to be more accurate now: I believe it could have.

If the Fed had opted for a rate hike, it would have been a vote of confidence — practical as well as symbolic — for the U.S. economy. It would have sent the message that our economy is strong enough to withstand the headwinds that might exist down the road from China and other emerging-market economies.

Sometimes perception can become reality.

Further, there will come a time when the U.S. — and its global counterparts — must raise rates. Indeed, we may be past that point here at home, and the Fed is now sustaining somewhat of an artificial market environment.

What does this mean for Main Street? Many yield-hungry investors have ratcheted up their exposure to risk by stretching into more volatile income-oriented assets such as high-yield bonds, real estate investment trusts and master limited partnerships. Those who haven’t have received scant income. This group includes some retirees and others in need of interest income, and they have gotten the short end of the stick.

With last week’s nonmove, none of that changed. The Fed acknowledged that it is not sure how the economy is going to respond to growth shocks in China. It’s also hard to see what could change between now and December to justify a reversal of course.

In short, the central bank said that it was uncertain about what to do, period.

And that may be the most troubling uncertainty of all.

Debra Silversmith is Chief Investment Officer at First Western Trust.