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History shows investors should stick to profitable companies if Fed tightens inflation action, Jim Cramer says


CNBC’s Jim Cramer told investors Thursday that they should invest in profitable businesses if there is a chance of a downturn. Federal ReserveA half-point rate increase is implemented based on an analysis of Fed’s 2000 double rate rise and the aftermath.

We know the best ways to keep Fed policy tightening. “The lesson from 2000 was to keep profitable businesses with genuine products or services and have significant dividends and buybacks. And to sell the rest,” said he.

The “Mad Money” host’s comments come after traders predicted half-point rate hikesResponding to Jay Powell of the Federal Reserve, we published this article in May and Juni. pledge on Mondayto resist rising inflation.

The Dow Jones Industrial Average rose 1 percent on Thursday while the S&P 500 gained 1.4%. Nasdaq Composite gained 1.9%

Cramer pointed out that the dotcom bubble burst in February 2020 when Alan Greenspan, then Fed Chair, implemented a double-rate hike in May 2020. Cramer stated that over the last 11 months the Fed had increased interest rates five different times. He said the May increase was concluding the tightening process.

Cramer said that 78% of Nasdaq’s value fell from March 2002 when it reached its peak, and 60% was due to Greenspan’s double rate rise. The S&P 500 fell 50% from its peak with almost 90% of its decline coming after the rate hike while the Dow Jones Industrial Average went down 39% from its high with 80% of the decrease coming after the hike, Cramer said.

He said that healthcare, financial and energy stocks were some of the winners, while tech stocks fell due to the collapse of the dotcom boom.

But, the host reminded viewers of outside factors which make the present and future markets unique. This includes the Russia-Ukraine War and recession in early 2000s.

“I do not believe we are watching an exact replay of the dotcom crash. … It wouldn’t be surprising if there is more pain between now, and the Fed’s next meeting in May in early May. This would especially apply to the companies that are not profitable in tech-heavy Nasdaq,” said he.

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