Mad Money

Cramer: Fed could spark a long awaited rally

Cramer: Fed could spark a long awaited rally
Cramer: Fed could spark a long awaited rally

So far, this year has brought weak earnings, issues of valuation and stress in the oil patch. But unless the Federal Reserve provides clarity on where it stands with rate hikes this year, Jim Cramer said it is going to be very hard for the market to find a footing.

"When you drill down, the proximate cause of much of these problems comes back to the Federal Reserve and its compulsion to raise interest rates into a tumultuous environment," the "Mad Money" host said.

Janet Yellen is slated to speak on Wednesday, and that is when Cramer thinks investors will realize just how important the Fed is to this market.

There is so much that needs to go right for us to get a bottom in stocks, but I still think it starts with the Fed.
Jim Cramer
Federal Reserve Chair Janet Yellen speaks during a news conference.
Jonathan Ernst | Reuters

The Fed is in a difficult spot right now because it is so analog. It analyzes the economy from the perspective of the unemployment rate. It isn't looking at it through the lens of anyone under 30 who is looking for a job or anyone over 50 who have been thrown out of a job.

And with the unemployment rate now under 5 percent, Cramer thinks the Fed may feel it must raise rates. It isn't considering the huge number of people that have left the workforce because they have given up.

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"Not only that, but this endless fixation on rising wages, without caveating the numbers by considering that so many states and cities have raised the minimum wage because it's a digitized economy, is ridiculous," Cramer said.

Cramer thinks states must take action, because it is too easy to crush a workforce in a shared economy. In fact, he considers the fixation with stopping the meager wages of the American worker as a justification for higher interest rates to be causing the Fed to turn a blind eye to what really matters.

Cramer knows that the Fed shouldn't only worry about the stock market. But the stock market is signaling slowdowns everywhere, perhaps because it recognizes that the Fed might act too soon in raising rates.

"There is so much that needs to go right for us to get a bottom in stocks, but I still think it starts with the Fed," Cramer said. (Tweet This)

So, stay tuned. Cramer thinks if Yellen gives clarity on Wednesday and confirms that the Fed will stay data dependent and it is too soon to raise rates — it could trigger the rally many have been waiting for.

Yellen is that important to the market's next move. It's all in her hands now.

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