The stock market was due for this sell-off, but the Federal Reserve certainly had a hand in kickstarting the pain, CNBC’s Jim Cramer said Friday as the major averages tumbled.
“That’s exactly what happens when the chairman of the Federal Reserve tells us he may need to overshoot with his rate hikes to ensure inflation is kept in check,” the “Mad Money” host said.
Cramer was referring to Fed Chair Jerome Powell’s Thursday comments on being “a long way” from neutral in terms of interest rates, a sign that the central bank was serious about its planned future rate hikes.
“It’s going to be hard for stocks to stabilize until he walks back those comments, or at least clarifies that he’s going to make his decisions based on the data rather than giving us a series of lockstep, autopilot rate hikes that the economy, as strong as it is with these employment reports, may not be able to handle,” Cramer said.
And with the Labor Department’s latest nonfarm payroll report showing lower job creation than many expected, Cramer said a bit of wage inflation wouldn’t be as detrimental to the economy as the Fed seems to think.
Still, he admitted that the Fed wasn’t the only force putting pressure on stocks. The U.S. dollar’s strength, higher bond yields and climbing mortgage rates all contributed to the declines, he said.
“I see housing, autos and now, after this week, maybe even retail slowing, so it’s entirely possible the Fed is ahead of the curve already when it comes to stamping out inflation,” Cramer said. “In the end, there’s only so much they can control, and these three industries really tell us that the rate hikes are already working like they’re supposed to.”
With that in mind, he turned to his game plan for the week ahead:
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