- CNBC's Jim Cramer lays out his reasons for why the Federal Reserve should back off its aggressive rate hike agenda.
- "I'm not saying that the Fed's gone crazy," the "Mad Money" host says. "I think it's gone lazy."
As the stock market continued its volatile losing streak on Thursday, with the market's "fear gauge" hitting its highest level since February, CNBC's Jim Cramer wanted to clear up some of the confusion around why stocks were falling.
"Right now, there's a ton of tension between the macro and the micro. The Federal Reserve cares about the macro — they're looking at unemployment, wage growth, anything that tells them about the totality of the economy," the "Mad Money" host said.
"Based on that, our new Fed chief, Jerome Powell, has concluded that business is so strong that, without a problem, it can handle a series of lockstep rate hikes well into 2019," he continued. "But the micro ... makes me think that the economy's already peaked."
On Thursday, President Donald Trump doubled down on his rebukes of the Fed's strategy, blaming the central bank for causing the market correction. On Wednesday, he called the Fed "crazy" for continuing to raise interest rates.
While Cramer didn't exactly support the president making those remarks, he did agree with him.
"I agree with President Trump that the Fed needs to tighten less aggressively, even as he probably shouldn't have said those nasty things in public because he's making it harder, not easier, for Jerome Powell to give him what he wants," he said. "When you look at the economy empirically right now, you start to see real problems."
Looking industry by industry, Cramer started to see signs of different markets unraveling.
"Housing is either pausing or down for the count," he said. "We know this because it's what Lennar, the largest homebuilder in America, told us. Lennar has its pulse on every market."
Key economic building blocks — things like packing materials and plastic — are either stagnant or dropping in price, indicating a slowdown in shipping, a leading barometer for the state of the economy, Cramer said.
Worse, oil and steel prices are rising, squeezing margins in the transportation and construction industries, he continued.
"When you consider all of these industries that have been slowing, ... you start to see some patterns," Cramer told investors. "The Fed is thinking about how things are right now — or, more accurately, how they were last month. I'm more concerned about where they're going to be, and it's not a positive direction."
To Cramer, the Fed's best bet would be to raise interest rates one more time, if that's even necessary, then ease and inspect the data before proceeding.
"Unfortunately, the Fed's using a snapshot to gauge the strength of the economy rather than getting its hands dirty by doing some homework," he said. "By the way, as someone who wants stocks to go higher, ... it would be great if the White House actually acknowledged some of this weakness. You can't say the economy's great, but also the Fed shouldn't tighten. It's got to be one or the other."
"I'm not saying that the Fed's gone crazy, that it's gone loco. I don't think it's gone crazy at all. I think it's gone lazy. It's a shame," the "Mad Money" host concluded. "I would like to be positive, but I have to settle for being constructive, and my empirical work says that I can't be sanguine until everyone knows what I know and just told you. But for now, our central bank seems to want to repeat history, and all I can say is they know nothing!"