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Jim Cramer Predicts Market Contraction as Federal Reserve Halts Rate Hike

15 June 2023
2 min.
Jim Cramer Predicts Market Contraction as Federal Reserve Halts Rate Hike

Fed's Pause Sparks Panic Selling

Jim Cramer, a renowned CNBC expert, provided valuable investor insights on Wednesday concerning the recent Federal Reserve meeting. The Fed's announcement of a temporary rate hike pause, along with indications of potential future increases later this year, has significant implications for the market.

Cramer suggests that panic selling among investors will cause the market to narrow in the aftermath of the Fed's actions. This situation was foreseen by Cramer, who had previously cautioned about it in recent weeks. He observed that certain investors lacked conviction in their holdings, simply buying to avoid missing out on the rally. However, the current sell-off has prompted them to hastily liquidate their entire portfolios.

Cramer believes the Fed will continue raising rates until it successfully curbs inflation. He compared the Fed's approach to that of an airplane circling the airport, burning off fuel to avoid an explosive landing. The Fed is giving the economy some time to deteriorate further before taking decisive action against inflation.

Cramer suggests that the Federal Reserve may not need to implement as many tightening measures as previously indicated. However, he foresees a decline in inflation driven by factors such as job losses, reduced wages, and the completion of new apartment complexes, which could potentially result in lower rents.

Uncertainty surrounds the timeline for the alleviation of this pressure, as indicated by Cramer. He suggests that for the market to regain its upward momentum, it requires a further decline, allowing for the selling by overly eager investors and the retreat of recent market entrants.

In Cramer's view, the market will only be prepared to resume its positive trajectory once these conditions are met. In the interim, a potential narrowing of the market is anticipated, possibly starting from lower levels. The spotlight will likely be on the "Magnificent Seven" tech stocks and select others that exhibit robust secular growth themes, which were instrumental in propelling the market's previous gains.

Persons1 and Companies2 in the news

American TV host at CNBC
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Rating companies
JP Morgan Chase
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Walt Disney Company
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Ford Motor Company
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