CNBC’s Jim Cramer said Friday that the Federal Reserve’s attempts to crush inflation by raising interest rates will inevitably bring down even “previously high-flying stocks” – even those that are “legitimate” companies.
The stock market is “a serious risk to contain inflation. It’s not just collateral damage, it’s one of them.” [Fed Chair Jay Powell’s] targets. Not all stocks, but certainly those with shaky valuation bases that were trading skyrocketing on sales or even orders, “the”crazy money“said the host.
“As we wait for the Fed to stop braking, previously high-flying stocks with no earnings and little sales will continue to move lower and lower, as they still represent an additional front” in inflation control, he added.
Shares fell on Friday, albeit to a lesser extent than Thursday’s dip, with both days surpassing the rally following Wednesday’s Fed meeting.
the fed increased interest rates by 50 basis points and noted that implementing larger rate hikes “is not something the committee is actively considering” to control inflation.
“I don’t think Powell is deliberately trying to suppress irrational exuberance in specific titles like a Shopify or… HubSpotor toasted bread or Bill.com. They are all legitimate companies, it’s just that their valuations were too high and that foam helped fuel the over-inflated IPO and SPAC bubble, ”he said, referring to initial public offerings and special purpose acquisition companies.
However, Cramer said that high-quality companies with real products, profits and shareholder value performed well during the Fed tightening and believes the overall economy is strong enough to withstand even a 100% rate hike. basis points.
“Powell took the possibility of a 75 basis point rate hike off the table. I see that as a mistake … For me, it’s just so much better to get the pain away as fast as possible,” he said.
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