Cramer says stock rally won’t beat bears

CNBC’s Jim Cramer said on Wednesday that he is still “drawn to own stocks” even as the Federal Reserve is aggressively raising interest rates in a way that some skeptics believe will send the US economy into recession.

“Today they probably sold at the rally. Tomorrow they will sell again because they are,” the Mad Money host said, referring to the surge in the late session on Wall Street when the S&P 500 and Dow Jones Industrial Average were released. their biggest daily gain since 2020.

Stocks surged in response to the Fed’s half-percentage rate hike that many expected, and Chairman Jerome Powell ruled out a future 75 basis point rate hike.

The intensity and breadth of the rally since Wednesday’s announcement suggests that some investors think the Fed can bring down inflation with tighter policies without triggering a significant economic downturn. However, Cramer said he believes the Fed’s vocal naysayers will not be shaken by Wednesday’s aid rally.

He acknowledged that there is uncertainty about the ultimate impact of a 50 basis point Fed hike. Until Wednesday, the last time the US central bank raised rates by half a percentage point in a single meeting was in 2000. A quarter percentage point increase is a typical gain.

“So, starting tomorrow, we will once again prepare for the worst and expect the worst…and as long as money managers aren’t sure who they are, they will continue to sell what they shouldn’t,” Cramer said. . “But if you’re in my camp, you’re attracted to equity ownership here because there are a lot of companies that could do well even if the more bearish camps turn out to be right.”

Cramer highlighted both individual companies and broad sectors that he believes could operate from here based on his economic outlook. For example, he said he likes Advanced Micro Devices, which struggled this year but just reported strong earnings and forward-looking forecasts.

According to him, the financial indicators are also in a good position. “Remember, banks instantly become more profitable” when the Fed raises short-term rates, said Cramer, whose charitable foundation owns two banks, Wells Fargo and Morgan Stanley. He was referring to banks’ net interest income, which is what they earn from lending after deducting what they pay customers on their deposits.

“You can also buy tech because tech stocks tend to do well after inflation peaks, but only profitable tech stocks are good because the losers won’t make it to the promised land” due to higher interest rates, he said.

Disclosure: Cramer’s Charitable Trust holds shares in AMD, Morgan Stanley and Wells Fargo.

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