CNBC’s Jim Cramer on Wednesday went via an inventory of financial issues that Federal Reserve Chair Jay Powell wants to handle to tamp down inflation and in flip assist the inventory market rebound.
“Right now, Powell’s losing on too many fronts, which means he has to get more aggressive about raising interest rates to cool things down. … Powell does have a daunting task, though,” the “Mad Money” host mentioned.
There “is a huge schedule of things. … I’ve only listed the most obvious seven. If Powell can slay these seven dragons, then making money in the stock market will come easy again. Until then, though, expect more horrific days like today. No gain without pain, and this time there’s a lot of it,” he later added.
Here is the checklist:
- Housing: “I think mortgage rates must go to 7% or 8% before it’s just too expensive and new homes start coming down in price. … Powell has a lot of wood to chop to get rates that high, but he must do so,” Cramer mentioned.
- Autos: “Powell has to choke demand for cars and the best way to do that is to raise interest rates. … We need a glut of cars to solve this intractable problem. Then the semiconductor makers can catch their breaths,” Cramer mentioned.
- Labor: “The more companies that decide they can’t afford to hire people here, the less we need to worry about a wage-price spiral,” he mentioned.
- Russia’s invasion of Ukraine: Cramer mentioned that whereas Powell doesn’t have management over its end result or length, the battle is inflicting commodities costs, together with oil and grains, to skyrocket.
- High freight prices: Either a slowdown in commerce or a rise within the variety of drivers will assistance on this entrance, Cramer mentioned.
- Airfares: Plane tickets have to get so costly that folks journey much less and in flip spend much less, he mentioned.
- Consumer financial savings glut: People have to spend their pandemic financial savings in order that they’re motivated to return to work, in accordance with the host.
The Dow Jones Industrial Average slid 3.57% on Wednesday whereas the S&P 500 dropped 4.04%, each marking their largest losses since June 2020. The Dow closed at its lowest degree since March of final yr. The Nasdaq Composite tumbled 4.73%.
Cramer famous that declines within the inventory market recommend customers will spend much less, whereas a glut of stock at retail giants level to cost markdowns. These components might assist decelerate the economic system, however Powell nonetheless has an arduous street forward to deliver down inflation, he mentioned.
“Remember, consumers saving money will help break inflation, while more spending just accelerates it. … Less consumer spending makes Jay Powell’s job a lot easier,” Cramer mentioned.