THE MUCH ANTICIPATED

pause has arrived. The Federal Reserve left its federal-funds rate at 5.25% after 17 consecutive quarter-point increases.

So what constitutes a "pause?" Fed Chairman Ben Bernanke hasn't been any more explicit since he first mentioned the possibility months ago. But the definition is pretty straightforward: "to cease or suspend an action temporarily," according to the American Heritage dictionary. The key word there is "temporarily." What's been worrying many market participants is that a pause is not an end. By definition, a pause means that the Fed campaign to raise rates will resume, the only question being when.

But let's not get too tied up in semantics. I doubt that's what Bernanke really meant when he used the word. I suspect a more accurate phrasing would've been that the Fed might stop raising rates, and then it would "wait and see." For one thing, he's been stressing that the Fed's future actions will be data dependent, meaning that neither he nor his fellow Fed governors know what they'll do until they have a better understanding of how the economy has responded so far to the series of rate increases. In this sense, the failure to raise rates may indeed be an end to rate increases, or it may turn out to be a pause if the Fed finds it needs to raise rates at a future meeting.

We may not be able to know what the Fed's next move will be, but surely there's little doubt that the long campaign to raise rates is at or near an end. The data are clear that the economy is slowing. The housing market has cooled off. Unless the laws of economics have been repealed, a slowing economy will in turn ease inflationary pressures. It will also curb demand for oil, and oil prices should finally decline. None of this is showing up in the data yet, because it's too soon.

So it's time to shift your thinking from an environment of ongoing rate increases to one of flat and, eventually, declining rates. This is true even in the unlikely event that the Fed resumes its rate-tightening campaign for what would surely be a brief period. I plan to explore the implications of this significant shift in more depth in a future column, but put simply declining rates have historically been good for both bonds and stocks. Bank of America recently analyzed 20 tightening cycles over the past 50 years and found that the S&P 500 rose consistently during the 12 months after the Fed stopped tightening. For the period 1989-2006, the large-cap index rose an average of 17.4%, as opposed to 8.9% during the 12 months before the Fed stopped.

This hasn't always been the case, most notably when the Fed stopped tightening during the tech-bubble implosion, and stocks continued their steep decline. Nor do most of these end-of-Fed-increase rallies happen right away. The first few months after the Fed stops tightening have often been shaky, as investors worry that the Fed may have tightened too much, pushing the economy into recession. There's been a lot of chatter along those lines recently, accounting for some of the market dips. But in recent years the Fed has a pretty good track record at avoiding or minimizing recessions.

So you probably have a month or two to adapt to this new environment. But plan to have your investments in place before this uncertainty about the economy is resolved. By then, profit opportunities will already have been realized.

As you review your portfolio, bear in mind that sectors that have historically performed best in this environment have been consumer staples, health care and financials. Sectors to avoid are technology, basic materials and consumer discretionary.