CNBC’s Jim Kramer said Friday that the Federal Reserve’s attempts to stifle inflation by raising interest rates will also inevitably lead to a fall in “previously highly developed stocks” – even those that are “legitimate” companies.
The stock market is “the main risk to curb inflation. It’s not just a side effect, it’s one of [Fed Chair Jay Powell’s] goals. Not all stocks, but, of course, those with a shaky price, which traded through the roof of sales or even orders, “Crazy moneysaid the master.
“As long as we wait for the Fed to finish slowing down, previously high stocks with no earnings and small sales will continue to drift lower and lower because they represent another front” in inflation control, he added.
Shares fell on Friday, albeit to a lesser extent than on Thursday, and both days overtook the rally that followed the Fed meeting on Wednesday.
Fed raised interest rates by 50 basis points and noted that the introduction of a larger rate increase “is not something the committee is actively considering” to control inflation.
“I don’t think Powell is deliberately trying to suppress the irrational size of specific stocks such as Shopify or… HubSpotor Toast or Bill.com. They are all legitimate companies, just their rating was too high, and this foam helped ignite the inflated bubble of IPOs and SPACs, ”he said, referring to initial public offerings and special purpose companies.
However, Kramer said high-quality companies with real products, profits and shareholder value worked well during the Fed’s tightening, and he believes the economy as a whole is strong enough to accept even a 100-point rate hike.
“Powell did not consider the possibility of raising the rate by 75 basis points. I see this as a mistake. … For me, it’s just much better to end the pain as soon as possible,” he said.
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