Latest news with #Fed-induced
CNBC
12 hours ago
- Business
- CNBC
Jim Cramer's guide to investing: Why the Fed matters
CNBC's Jim Cramer told investors that Wall Street is always looking for signals — especially from the Federal Reserve. While he said market action isn't always dictated by the Fed, stocks can be highly-reactive to the central bank when the economy is at an inflection point. "When the Federal Reserve matters — when it's tightening too aggressively or when it's easing, it's about to start easing — well then it really, really matters," he said. While the Fed can weaken the economy by raising interest rates, Cramer emphasized that it can also spur economic growth by cutting them. When the economy cools down, he said, the Fed will often stop hiking up rates and then start to bring them down. Cheaper overnight borrowing for banks mean that consumers and businesses have less incentive to save money and more incentive to spend or invest, Cramer said. Increased consumer spending and business growth create a "virtuous circle," Cramer said, as expanding companies hire and pay more employees who then go on to spend more money. Once the Fed stats to cut, Wall Street hedge funds tend to follow the same "playbook," Cramer said. They sell recession-proof stocks like utilities and consumer staples, and they buy cyclical stocks, or ones that do well as the economy flourishes. However, he advised investors to be careful and keep a diversified portfolio during these economic rotations. He added that it's also wise to be cautious when trying to pick up stocks that have gone out of favor. Some hedge funds, he said, "don't want to fight the Fed in either direction" and won't stop selling an out-of-favor group because it's become too cheap. According to Cramer, it's worthwhile to remember that Fed-induced economic changes can be reversed. However, he also said it can be difficult to discern when the Fed will change course, adding that central bank leaders can approach the job differently. "Any problem that's man-made can be unmade," he said. "And you need to factor this into your calculus or you'll miss out on some really major moves." Click here to download Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest
CNBC
12 hours ago
- Business
- CNBC
Jim Cramer's guide to investing: What does the Federal Reserve do?
It's important for investors to understand how the Federal Reserve operates and why it can drive market action, CNBC's Jim Cramer said. "We fear the Fed because the Fed sets interest rates, and if they get it wrong, they can allow inflation to run unchecked or do some real damage to the economy and to you," he said. "We adore the Fed because when they get it right, the results can be very, very good for the stock market." The Fed is the U.S.'s central bank, tasked with regulating monetary policy and setting the federal funds rate, which is the short-term interest rate banks can use to borrow from each other overnight. The Fed is charged with keeping inflation in check without sending the economy into a recession, encouraging employment while keeping prices stable. It is considered an independent agency, as board members are appointed to serve terms, not elected. This independence relieves reelection pressure that might discourage Fed members from being "ruthless enough" if it's necessary to make unpopular policy decisions that bring the market down, Cramer said. When the economy seems to be slowing down, the Fed cuts interest rates to stimulate business action. Rate cuts, he said, make it easier to own stocks and can send the market soaring. But when inflation heats up, the Fed raises rates, sometimes aggressively. While rate hikes hinder inflation, they also hurt the economy. Banks pass on increased borrowing fees to customers, which makes businesses more cautious and less apt to expand or hire new employees. Cramer said there have been Fed-induced recessions followed by Fed-induced recoveries. Even though part of the Fed's job is to promote employment, Cramer said it must sometimes encourage layoffs to quell fiery inflation. Inflation "destroys a lot of wealth, and high prices make life miserable for everyone," Cramer said, adding that it can be "very difficult to stamp out." Wage inflation is the most dangerous kind of inflation to the Fed, he continued. When businesses feel they must raise wages to keep employees, they raise their prices to compensate, Cramer continued. As workers have more money to spend, demand increases, so prices continue to rise, and "suddenly there's inflation everywhere," Cramer said. He added that higher wages then become meaningless to consumers because everything is so expensive. "When you see inflation, that should scare you," Cramer said. "Because that means the Fed will raise interest rates to stamp it out. They're going to do their job, even if it means sending the economy into a tailspin." Click here to download Jim Cramer's Guide to Investing at no cost to help you build long-term wealth and invest
USA Today
21-03-2025
- Business
- USA Today
US stock futures lower as Fed-induced rally runs out of steam
US stock futures lower as Fed-induced rally runs out of steam Show Caption Hide Caption Recession fears persist amid inflation and trade wars President Donald Trump did not rule out the possibility of a recession in a recent Fox News interview, amid his administration's continuing trade war. U.S. stock futures point to a lower opening after failing on Thursday to muster enough strength to extend the Federal Reserve-induced rally. Futures tied to the broad S&P 500 dropped -0.23%. Blue-chip Dow futures fell -0.24%. Tech-heavy Nasdaq futures slipped 0.29%. Stocks rallied Wednesday afternoon after the Fed left interest rates unchanged, as expected, but still predicted two more rate cuts this year despite tariffs that could boost inflation. However, the rally ran out of steam and investors scattered to the sidelines, allowing stocks to drift lower. Even with Thursday's dip, the S&P 500 is on pace for a weekly gain after dropping for four consecutive weeks. The Dow is on track for its best weekly gain since January, but the Nasdaq remains in the red. The Nasdaq's on track for its fifth straight losing week and its longest stretch of weekly losses since May 2022. Corporate news Nike topped analysts' estimates for earnings and revenue in the company's fiscal third-quarter. Micron beat analysts' forecasts in the second quarter and expects to do so again in the third quarter. FedEx earnings missed analysts' expectations in the delivery company's fiscal third-quarter. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
Yahoo
04-03-2025
- Business
- Yahoo
Jim Cramer on Modine Manufacturing Company (MOD): ‘It Has Come Down So Much'
We recently published an article titled . In this article, we are going to take a look at where Modine Manufacturing Company (NYSE:MOD) stands against the other stocks Jim Cramer recently talked about. Jim Cramer, the host of Mad Money, recently shared valuable investing lessons drawn from his 40 years of experience in the field. He noted that he often emphasizes the importance of discipline over conviction, repeating this message regularly on his show. 'I am constantly on this show telling you that discipline always trumps conviction. I tell it to you over and over and over again. In other words, no matter how much you may love a stock, no matter how enthralled you are with the underlying story, if the rules say sell, you sell it.' READ ALSO: 11 Stocks on Jim Cramer's Radar and Jim Cramer Said These 13 Stocks Can Hold Their Value Amid Tariffs Cramer also highlighted one of his fundamental investing rules: "Bulls make money. Bears make money. Pigs, well, they get slaughtered." He explained that this phrase serves as a reminder, especially when stocks rise sharply, and investors become overly confident in their gains. Cramer observed that, too often, people get intoxicated by their profits and start believing they are invincible. However, it is precisely at that point of overconfidence that caution is most needed, as acting like a pig can lead to significant losses. He then said: 'Just to be clear, bulls don't have a monopoly on piggishness. The same idea applies to investors who press their bets too shortly, too aggressively on the short side.' He pointed out that the same principle applies to those who aggressively short stocks. He explained that while there have been significant market declines, such as the dot-com crash of 2000 and the financial crisis of 2008-2009, most stocks tend to recover fairly quickly. Even during the Fed-induced market downturn in late 2021, those who remained too committed to short positions for too long ended up facing painful losses. By the fall of 2022, markets had rebounded, and those who had not adapted to the changes were left with nothing. 'Why is this rule so important? Simple. One of my chief goals is to help you stay in the game. You know that's the hardest part of investing. It's holding on through the difficult periods, taking short-term pains so you can have long-term gains, which is what's happened in the stock market for, for a century.' For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 24. We listed the stocks in ascending order of their hedge fund sentiment as of the fourth quarter of 2024, which was taken from Insider Monkey's database of over 1,000 hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (). A technician in a factory, assembling a gas-fired unit heater. Number of Hedge Fund Holders: 43 Cramer noted that potential sellers were swarming Modine Manufacturing Company (NYSE:MOD) as he explained: 'Yeah, I gotta tell you… people decided that that is part of the data center and the CFO sold a lot of stock so people are itching to get out. It has come down so much. I don't know what they're itching about.' Modine Manufacturing (NYSE:MOD) offers thermal management products, including heat transfer coils, unit heaters, cooling systems for data centers and powertrains, as well as coatings and maintenance services. Fred Alger Management stated the following regarding Modine Manufacturing Company (NYSE:MOD) in its Q4 2024 investor letter: 'Modine Manufacturing Company (NYSE:MOD) provides a diverse range of systems and solutions that improve indoor air quality, cool data centers, conserve natural resources, reduce harmful emissions, and promote environmentally friendly refrigerants. Since the appointment of a new CEO in December 2020, the company has undergone a significant transformation, simplifying its business, aligning strategies by market verticals, and adopting the 80/20 business philosophy (i.e., prioritizing 20% of inputs that drive 80% of outcomes) to drive decision-making. Despite reporting strong fiscal second-quarter results, shares detracted from performance due to the absence of a forward guidance raise, which was attributed to the company's strategic move away from lower-margin vehicle business. In our view, Modine remains in the midst of a significant transformation, with increasing recognition in the high-growth data center cooling market, where it is positioned as a strong competitor and potential market share gainer.' Overall MOD ranks 3rd on our list of the stocks Jim Cramer recently talked about. While we acknowledge the potential of MOD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MOD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap Disclosure: None. This article is originally published at Insider Monkey. Sign in to access your portfolio
