Jim Kramer said Friday that the Federal Reserve’s efforts to curb inflation by raising interest rates would inevitably also bring down “high-flying stocks” – even those of “legitimate” companies.
The stock market is a “big risk to curb inflation. It’s not just collateral damage; it’s one of [Fed Chair Jay Powell’s] goals. Not all stocks, but the unstable valuations are traded through sell or even roof orders,” said the Mad Money host.
“While we wait for the Fed to put the brakes on, previously fast-moving stocks with no gains and minor selling will continue to move lower. As they present another front” for controlling inflation.
Stocks fell on Friday, albeit lower than Thursday, both days ahead of a rally following Wednesday’s Fed meeting.
The Fed increased interest rates by 50 basis points, noting that implementing more extensive rate hikes “is not something the commission is actively considering” to control inflation.
“I don’t think Powell is intentionally trying to limit the irrational abundance of certain stocks like Shopify or … HubSpot or Toast or Bill.com. They are all legit companies, but their ratings are too high, and this froth helps increase the IPO and SPAC bubbles. Which is increasing,” he TELL, referring to IPOs and special purpose vehicles.
However, Kramer said quality companies with real products, earnings and shareholder value did well during Fed tightening. And he believes the economy as a whole is strong enough to accept even a 100 basis point hike.
“Powell ruled out a 75 basis point rate hike. I see this as an error. It’s much better for me to get over the pain as quickly as possible,” he said.