The US markets saw the initial rally once again reversed, despite having traded over 350 points higher. The 700 point swing yesterday materialized following the FED Chairs comments that 2019 will see their balance sheet shrink.
Here is how Cramer put it:
The only people who should cheer Powell’s statement “are the rich,” because their “wealth will be preserved.”
“If you work for a living, you’re finally getting a raise after a lost decade of wage growth,” he continued. “Powell wants to put a stop to that. I think that’s his goal.”
Over the next few days, stocks will also feel the effects of the central bank’s move, Cramer said.
“On day one of this new leg , all stocks go lower,” he said. “On day two, the stocks that do better in a recession start to rally, as long as the yield on the benchmark 10-year Treasury has plummeted to 2.7 percent, signaling a severe slowdown. I like Clorox, I like PepsiCo, I like Procter & Gamble [and] I like the utilities.”
“Day three, the classic growth technology stocks rally, the ones that don’t need a strong economy to grow their earnings, because Jay Powell just assured us we won’t have a strong economy,” he continued.
All in all, if you’re buying stocks at these levels, you’re fighting the Fed, and that’s a hard fight to win, Cramer warned.
“Let me put it very simply: Powell wants a slower economy than we have. He wants one that hurts Main Street,” he said. “He has his reasons, but please, don’t go into denial here. The Fed is perfectly happy to gradually strangle … the U.S. economy in order to stamp out inflation, or the potential for inflation, and that’s bad news for corporate earnings, which means it’s bad news for you.”
Here is reality . . .
Europe is in political and economic trouble, the east is in economic trouble, South America is an utter socialistic mess. The world is looking to invest in a location that is safe, the USA. Hopefully, global investors will ignore this .25% rate hike within a few weeks and resume flowing their capital to the US Markets so the bull market can resume. If both houses work positively together in Washington and international capital continues to flow to the US, then stability should settle the markets after the first month of 2019.
Investors must come to grips with reality. Rising rates in a controlled fashion is bullish for the markets, not bearish as most people think.
Remember to keep checking you daily, weekly, and monthly trade arrows.
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