Cramer on buying growth stocks after inflation shook the market

CNBC’s Jim Cramer said there are two ways market players can approach high-flying growth stocks that have been swayed and swayed by a volatile session on Wall Street Tuesday.

Investors may choose to join the sell-off that has dropped some tech names like Apple into negative trading territory this year.

The other choice – following Federal Reserve Chairman Jerome Powell’s repeated commitment to keep interest rates low – is to stick with the ride and consider charging worthy stocks discounted from their highs. Cramer said after the market closed mixed.

“After the late afternoon recovery, it’s not too late to sell the higher-end stocks if you want to,” said the host of “Mad Money”. “But as for the better growth stocks, which are more than 10% below their high, call me a buyer. Not all at once, not big, but still a buyer on every new test of that 9:47 low we saw today. . “

Cramer’s estimate of the current state of the market follows a rollercoaster trading day on which the major US averages bounced off their lows in sessions. The market saw a steep sell-off in the morning, with the Nasdaq Composite at its low close to 4%, before the blue-chip Dow Jones and benchmark S&P 500 managed to post modest gains at close.

The Dow advanced more than 15 points to 31,537.35 for a 0.05% gain. The S&P 500 finished 0.13% higher at 3,881.37, finishing in fifth. The tech-heavy Nasdaq couldn’t rally enough for a positive day, falling 0.5% to 13,465.20, extending Monday’s losses.

“I’m happy to foster the idea of ​​calling the registry here, but I just happen to like growth stocks that fear reflation. I like growth stocks when the risk is high. I like growth stocks when the risk is off,” Cramer said.

“If you want to keep the growth stocks … you have to be willing to hurt some, just like late 2015 and early 2016 – that was the last great moment to buy these stocks – or you can just sell some if you want and try to switch back at a lower level, ”he added.

The market has toiled through a rotation as investors traded growth and technology stocks that outperformed during the pandemic for value play from companies that are expected to see their operating returns as the economy reopens. The Nasdaq is now down 4.5% from its highs earlier this month.

Concerns that a rebound in inflation could prompt the Fed to hike interest rates, such as twice in a three-month period between 2015 and 2016, has shaken investors out of growth stocks in recent days, Cramer said. Higher interest rates pose a challenge to growth and utility companies.

Stock prices of Apple, Salesforce and ServiceNow are all down at least 3% this week.

During an appearance before Congress on Tuesday, however, Powell told lawmakers that inflation remains “soft,” the labor market faces ongoing challenges and that the central bank was determined to follow its current monetary policy.

That reassured investors about interest rates and helped the market recover some losses.

“This time, our Fed chief has vowed to hold off on raising rates – too many unemployed – but there comes a time and a point when these growth stocks will be somewhat hopeless,” Cramer said. “They’ll look something like today … before people came to buy.”

Correction: This story has been updated to reflect the correct number of points the Dow has advanced with.

Disclosure The Cramer charity owns stock in Apple and Salesforce.

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