The Federal Reserve on Wednesday gave investors a reason to be bullish, but the pressure from the White House is pulling down optimism, said CN Cracker Jim Cramer.
The central bank decided to keep its reference rate in place at the June meeting and signaled the possibility of a rate cut in the future to increase a slower economy. This means that President Donald Trump, at least for the moment, did not get his wish.
"Normally, I would tell you you bought stock left and right with the Fed to cut interest rates, and I still find it sensible to be bullish," says "Mad Money" values. "But with the president on the warpath, you have to be more cautious, because even if the trade war is justified, the longer it goes on … the worse it is for our economy. "
History shows that financial, retail and housing shares are good stocks to buy when the Fed decides to ease monetary policy. said Cramer.
Dow Jones Industrial Average increased 0.1
"Loans are getting cheaper, more money is pouring into the system via credit, and trading picks up, "Cramer said." At the same time, short-term Treasuries become less attractive as investments compared to dividend shares. "However, Powell must maneuver Trump's influence, which has demanded agency reductions and suggested a In the press conference, Powell said that the consumer is strong, but business investment has declined, especially in manufacturing, Cramer noted. The chairman also said he expects to earn his full term.
"In theory, if these negative trends continue, employment will soon hit and the weakness begins to bleed over to the consumer," Cramer said. "That's what the Fed is" careful monitoring "- it's a phrase I said you wanted to hear today – because it means Powell is ready to give us the cut."
Cramer said the Fed chair "friendly and respectful" did not blame the slowdown on tariffs, but the trade war is on the agency's minds. The host added that Powell was sitting on a powder bowl with Trump who hit him. Trump does not want to admit that a price reduction is needed because of the trade war and instead wants to blame the December rise, he said. Trump thinks the tariffs are good for the economy, Cramer said.
"I think he wants Powell to give us a great mea culpa. He will tell us that the Fed will cause a recession, if not Powell relents," he said. "There is no escape from the twist of this white house. I conclude that the president is starting to play the debut right now before leading to the G-20 meeting."
What will trigger Powell to reverse monetary policy is weaker Number of employees and consumption expenditure, Cramer said. More tariffs on China threatened by Trump will not push the Fed to act, he said. Powell wants to maintain the nature reserve's independence.
"That's why I expect the president will keep hectoring him and hectoring him and hectoring, because Trump needs – desperately needs – to raise tariffs everywhere," says Cramer, "and desperately needs lower prices" so that economy does not fail "before the election."