Fed’s fight against inflation will beat down ‘shaky’ stocks
CNBC’s Jim Cramer said Friday that the Federal Reserve’s attempts to crush inflation by raising interest rates will also inevitably bring down “formerly high-flying stocks” – even those that are “legitimate” companies.
Inflation control is a “major risk” from the stock market. It isn’t just collateral damage; it’s also one of the main risks to inflation control. [Fed Chair Jay Powell’s] targets. Not every stock, but certainly the ones with shaky valuation underpinnings that were trading through the roof on sales or even orders,” the “Mad Money” Host said.
While we await the Fed to end putting the brakes on, the once high-flying stock with little earnings and no sales will keep drifting lower. They represent yet one front in inflation control, he said.
Although stocks fell slightly on Friday than on Thursday, they were still down more than the decline on Thursday. Both days also overtook the rally that occurred after Wednesday’s Fed meeting.
Fed raised interest ratesBy 50 basis points, and noting that the inflation control committee has “never been actively looking at” larger rate increases to curb inflation.
Powell may not be trying to curb excessive buying in certain stocks, such as A. Shopify or … HubSpotOr ToastOr Bill.com. “They’re all legitimate businesses, but their valuations were far too high and that froth helped fuel IPO and SPAC boom,” he explained, referring both to special-purpose acquisition companies and initial public offerings.
Cramer stated that quality companies, with profits, real products and shareholder value, have fared well in the Fed’s tightening. He believes that the economy is strong enough for even a 100 basis point rate increase.
Powell ruled out any possibility of an increase in the rate by 75 basis points. That is a huge mistake. … To me, it’s just much better to get the pain over with as fast as possible,” he said.
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