December 7, 2023

Brighton Journal

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Cramer explains how four camps of buyers see mixed messages from the Fed

Cramer explains how four camps of buyers see mixed messages from the Fed

CNBC’s Jim Cramer on Thursday detailed four different schools of thought in examining the mixed messages they conveyed from Wednesday’s Federal Reserve meeting. While the Fed chose not to raise interest rates in the short term, it has hinted at more hikes later this year.

Cramer noted that while investors had little time to process the implications of the Fed meeting, they are now eager to invest their money.

“They got their reasons, or maybe they even made up their reasons, and today, the purchases, well, let’s just say it ended in impulsive abandonment,” he said. “I say that, again, because buyers are now controlled by animal spirits, and they can easily craft a story about buying any stock they want.”

Cramer noted that the first camp of buyers thinks the Fed’s bark is worse than its bite and they don’t think it will end up driving interest rates to the point of recession.

These buyers, according to Kramer, are investing in industrial companies that are doing well in a bustling economy. Industries are needed for a large number of companies, from road construction to oil drilling to building data centers and semiconductor foundries needed for artificial intelligence.

The second camp believes the exact opposite. For them, the Fed’s moves indicate that it will continue to tighten until it forces the economy into a recession. Cramer believes these buyers would be wise to invest in big pharma because the industry is “more or less recession-proof.”

Kramer cited Eli Lilly, which is developing two very expensive products — Majorna, which is used for diabetes and weight loss and has already been cleared, and a new treatment for Alzheimer’s disease. He also highlighted Johnson & Johnson, which is in the middle of a lawsuit over allegations that baby powder containing talc causes cancer, but still has a thriving medical device business doing particularly well due to a backlog of non-urgent ear surgeries. After covid.

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The third camp, Cramer said, consists of those with “FOMO,” or fear of missing out, who are excited about fast-food chain Cava and feel it has had one of the most successful initial public offerings ever.

The fourth camp consists of money managers who have been short on this market so far and now realize they made a mistake.

“When you put these four, often contradictory, groups of buyers together, you can get a great show across the board like we did today,” Cramer said. “In the end, maybe only one camp can be right, but in the meantime, as bets are being placed, nearly every type of stock goes up.”