Mad Money

Cramer says market reaction to Fed could mean 'back to normal' for stocks

Cramer: Market's gentle post-Fed sell-off may mean business as usual for stocks

The stock market's reaction to the Federal Reserve announcing it would raise rates on Wednesday was the most unthinkable response Jim Cramer could have imagined.

After the 2,000 point run up the market had before the announcement, Cramer thought the market was due for a sell-off.

Instead of a wholesale slaughter or collapse, there was a relatively gentle sell-off—which was good news for Cramer.

"I think it means that we may be actually getting back to normal … I can't stress enough how seminal this normalization is," the "Mad Money" host said.

"For as long as I have been investing … we have always had to pay attention to what the Fed is up to,"

All the rate hike did was ratify what we already knew, which is that it was time to raise rates because the economy is better
Jim Cramer
A trader works on the floor of the New York Stock Exchange as a television screen displays coverage of U.S. Federal Reserve Chairman Janet Yellen shortly after the announcement that the U.S. Federal Reserve will hike interest rates in New York, December 14, 2016.
Lucas Jackson | Reuters

The market's reaction could be an indication that investors can once again go back to focusing on companies and how they are doing, instead of worrying about the Fed fund futures or the S&P 500 Index futures, which have been key metrics for money managers for ages.

However, Cramer warned not to ignore the Fed. When it raised interest rates a year ago by a quarter of a percentage point, the market was clobbered. It was clear that neither the economy nor the stock market was ready for the rate hike. This was because economic growth was uncertain and the outlook was cloud at the time.

This time the market was ready.

"So what's the real takeaway here? I think it's pretty simple. We had a big bad event. Rates went up. But all the rate hike did was ratify what we already knew, which is that it was time to raise rates because the economy is better," Cramer said.

The real question in Cramer's mind right now is whether the Trump rally will continue or take a breather.

President-elect Donald Trump clearly thinks the economy is weaker than Fed chair Janet Yellen does, Cramer said. He still continues to talk about how slowly the economy is performing, and says businesses needs help —but not from the Fed, but from the White House.

"Needless to say, that is a very different attitude toward business than President Obama," Cramer said.

In the end, Wednesday was just another day in the office for the stock market. That is good news, considering it could have been a very tumultuous day. Cramer calls it getting back to normal, at least as normal as they can be.

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