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History shows that investors should stick to profitable companies if the Fed tightens inflation action, Jim Cramer says.

CNBC’s Jim Cramer on Thursday advised investors to invest in profitable companies if the Federal Reserve sets a double-rate double-point hike using the Fed’s latest double-hike rate hike and its 2000 impact.

“We know what works when the Fed is aggressively tightened. The lesson of 2000 is to stick with profitable products or services with significant dividends and purchases and sell the rest,” he said.

Hosted by “Mad Money” comments after traders announced mid-point rate hikes in May and June in response to Federal Reserve Chairman Jay Powell’s commitment on Monday to take strong action against rising inflation.

The Dow Jones Industrial Average rose 1% on Thursday, while the S&P 500 gained 1.4%. The Nasdaq Composite rose 1.9%.

Cramer noted that Alan Greenspan, when the Fed chairman set a double rate hike in May 2020, when the dotcom bubble burst two months earlier. The Fed raised interest rates fivefold in the past 11 months, saying May interest rates had ended their tightening cycle.

The Nasdaq lost 78% of its value in March of that year to October 2002, with 60% of the losses occurring after Greenspan imposed a double rate hike, according to Crame. The S&P 500 fell 50% from its peak after a nearly 90% drop in its rate of decline, while the Dow Jones Industrial Average fell 39% after an 80% drop after its rise, Cramer said.

Some of the winners were health, energy and financial stocks, and while technology stocks fell as a result of the dotcom bubble burst, he added.

However, the host reminded the audience that there are external factors, both current and 2000 markets, that are not unique and directly comparable. such as the current Russia-Ukraine war and the recession of the early 2000s.

“I don’t think we’re seeing a sudden replay of the collapse of dotcom … But I’m not surprised if the averages hurt more from now until the next Fed meeting in early May, especially the profitable NASDAQ heavy technology companies,” he said. yours.

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History shows that investors should stick to profitable companies if the Fed tightens inflation action, Jim Cramer says.

Source link History shows that investors should stick to profitable companies if the Fed tightens inflation action, Jim Cramer says.

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