CNBC’s Jim Cramer on Tuesday refuted the idea put forward by Treasury Secretary Janet Yellen that rising inflation could justify higher interest rates.
“For now, I can see and feel inflation in full from all sides, but I’m sticking to Jay Powell as a quarterback,” said Mad Money’s host, the Federal Reserve Board of Governors. He mentioned the chairman of the meeting. Kramer said Powell argued that rate hikes were unlikely until the labor market recovered from last year’s slump.
“For Yellen, I think it’s reminiscent of her worst call at the Fed when she decided to tighten in December 2015 after years of low interest rates,” Kramer added. “She said she wanted to curb inflation. Within six weeks, inflation collapsed, causing real damage to the economy.”
The Treasury did not return CNBC’s request for comment.
“It may be necessary to raise interest rates somewhat to prevent the economy from overheating,” Yellen said. These comments contributed to the volatile session on Wall Street.
The Dow Jones Industrial Average showed a slight rise, rebounding from a 347-point decline from the first half of the session. The S & P 500 and Nasdaq Composite ended Tuesday’s session with a 0.7% and 1.9% drop, respectively.
Tuesday’s move and Yellen’s remarks come from rising commodity prices, a leading indicator of inflation. For example, US oil prices have risen by more than 17% in the last three months and nearly 12% in the past month.
Rising commodity prices are bad news for most companies, but investors can align their portfolios with stocks that can benefit from the environment, Kramer said.
“We need to be aware that we are in a tolerant market. Investors like to buy high quality stocks that are declining,” he said. “There will be winners and losers. It’s our job to try to choose a winner, just as buyers chose an industry at the bottom of the market today.”
Meanwhile, Cramer provided the idea of a stock that could benefit from increased commodity costs. Winners include copper company Freeport-McMoran and steelmakers Cleveland Cliffs and Nucor. Cleveland-Cliff’s share price soared nearly 12% on Tuesday. This year, all three stocks rose by more than 40%.
“They are doing the same thing as usual, but their selling prices continue to rise,” he said. “It gives them so-called operating leverage, where increased revenue produces a huge increase in revenue.”
Kramer also advised that if inflationary pressures were maintained, stocks like Kroger and Albertsons could be hurt. He added that the surge in raw costs has hit companies like DuPont hard.
Disclosure: Cramer’s Charity Trust owns a stake in DuPont.
Jim Cramer rejects Treasury Secretary Janet Yellen’s inflation assessment
Source link Jim Cramer rejects Treasury Secretary Janet Yellen’s inflation assessment