Dow could have ‘easily’ been down 1,000 points on Fed hike

CNBC’s Jim Cramer was surprised stocks didn’t plunge even further on the Federal Reserve’s Wednesday decision to hike interest rates by a quarter-point.

The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all sank to new lows for 2018 after the Fed’s announcement, in which the central bank also forecast two more hikes in 2019, down from three as previously stated. The Dow gave up what had been a 381-point intraday gain to close 351 points lower.

“If anything, I was surprised at how well the averages held up today,” said Cramer, host of “Mad Money.” “You could easily argue that we should’ve been down 1,000 Dow points. [It] would’ve made a ton of sense given what I heard.”

“But because the market was already so oversold, the worst it’s been since the lows in February, the downside was more limited,” he explained.

Even so, Cramer said he couldn’t “blame anyone for selling” after the Fed’s decision, which by default made risk-free assets like certificates of deposit more attractive than much of the stock market.

“You can earn 3.5 percent for five years without doing anything. Count me in. What can I say? That’s a lot more satisfying than trying to play this treacherous market, at least for your retirement money,” he said. “Only the fact that so many people have already bailed cushioned us from a huge fall.”

As for the Fed’s decision itself, Cramer said he was “disappointed” in Fed Chair Jerome Powell for not saying he would wait and see how 2019 plays out before committing to more hikes.

Even though he lowered the boon to two hikes instead of three, Powell still brushed off economic pressures that are at risk of igniting a slowdown if the Fed tightens to drastically, the “Mad Money” host argued.

“That’s not data dependence, it’s data indifference,” Cramer said. “Look, I sincerely hope that he is right. I’m not rooting against Jay. I would love it if this economy is doing much better than I believe. But, sadly, I think Powell’s the one who’s wrong.”

Cramer added that the only people who should cheer Powell’s statement “are the rich,” because their “wealth will be preserved.”

“If you work for a living, you’re finally getting a raise after a lost decade of wage growth,” he continued. “Powell wants to put a stop to that. I think that’s his goal.”

Over the next few days, stocks will also feel the effects of the central bank’s move, Cramer said.

“On day one of this new leg , all stocks go lower,” he said. “On day two, the stocks that do better in a recession start to rally, as long as the yield on the benchmark 10-year Treasury has plummeted to 2.7 percent, signaling a severe slowdown. I like Clorox, I like PepsiCo, I like Procter & Gamble [and] I like the utilities.”

“Day three, the classic growth technology stocks rally, the ones that don’t need a strong economy to grow their earnings, because Jay Powell just assured us we won’t have a strong economy,” he continued.

All in all, if you’re buying stocks at these levels, you’re fighting the Fed, and that’s a hard fight to win, Cramer warned.

“Let me put it very simply: Powell wants a slower economy than we have. He wants one that hurts Main Street,” he said. “He has his reasons, but please, don’t go into denial here. The Fed is perfectly happy to gradually strangle … the U.S. economy in order to stamp out inflation, or the potential for inflation, and that’s bad news for corporate earnings, which means it’s bad news for you.”

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