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Key Points
- CNBC’s Jim Cramer explained Thursday how investors should approach stocks ahead of the next Federal Reserve meeting.
- “What’s the best way to deal with the big bad event? First, don’t freak out from now on going into a Fed meeting,” Cramer said.
CNBC’s Jim Cramer said Thursday investors shouldn’t join the stock sellers ahead of the next Fed meeting.
The Federal Reserve raised interest rates by a quarter percentage point Wednesday, its first hike in three years, bringing its benchmark rate to a range of 3.75% to 4%. Stocks had sold off in seven of the eight sessions leading up to the decision, then rebounded Thursday.
Cramer said the moves reflect the return of what he calls the “big bad event” — a scheduled catalyst that creates enough uncertainty for investors to sell ahead of it, only for stocks to rebound once the event passes and the outlook is clearer.
“This is incredibly important, because I think it explains a lot of the sell-off leading into the meeting, and also today’s rally,” the “Mad Money” host said.
Cramer said the pattern was common decades ago, when uncertainty surrounding major bond auctions and Fed decisions could weigh on markets for days beforehand. After the event, he said investors often returned to the market. He expects that pattern to become more important if the Fed continues raising rates. The central bank’s next policy meeting is scheduled for Oct. 27 and 28.
“From now on, every Fed meeting will be treated like a big bad event, but that doesn’t mean you should join the sellers,” Cramer said. “It just means you need to prepare yourself for the new pattern.”
For most investors, Cramer said the best approach to a Fed meeting isn’t to try to time the sell-off by dumping stocks ahead of it. Instead, he said investors looking to put money to work should consider using weakness closer to the decision as an opportunity. To be sure, he recommends being selective about the stocks they buy.
“If you want to do some buying, buy as close to the meeting as possible, and then buy more immediately after the meeting,” Cramer said. “That way you’ll participate in the post-event rebound.”
Cramer pointed to technology stocks as one area he expected investors to return to after the meeting, reiterating his support for cybersecurity companies as well as Intel and Micron. Cramer’s Charitable Trust, the portfolio run by CNBC’s Investing Club, owns shares of Intel and Micron.
