Cramer says new Fed worries led to the most aggressive selling in Club stocks in a decade

Published Wed, Apr 6 202211:26 AM EDT

Jim Cramer said Wednesday he's turned "very conservative" on the stock market because the Federal Reserve just changed the game. "I think people should be paring back," Cramer said on CNBC, less than 24 hours after two of the Fed's biggest proponents of easy monetary policy telegraphed shifts in their thinking and talked about taking much tougher action to fight spiking inflation. Cramer said he's been following his own advice, paring aggressively — "maybe the most aggressively for the Club in a decade." To that end, after making Fed-driven trades late Tuesday , the Club first thing Wednesday morning sold some shares of tech stocks Amazon (AMZN), Marvell Technology (MRVL) and Microsoft (MSFT) as well as Ford (F), which would be sensitive any deterioration in the economy due to higher interest rates. Here's the timeline over the past 24 hours that's signaled to the Club that we needed to take more measures to protect ourselves from what could be more stock market declines. Fed Governor Lael Brainard said in a hawkish speech Tuesday it's of "paramount importance to get inflation down" and shrink the balance sheet at "a rapid pace." In a separate speech Tuesday , San Francisco Fed President Mary Daly, a one-time dove like Brainard, said that inflation is as harmful as not having a job. Since the nation's unemployment rate is so low, Daly's commentary signals to us that central bankers believe they can slow the economy to fight inflation without harming the jobs market too much — thus fulfilling their dual mandate of fostering maximum employment and to control prices. But the market is already worried about the economy going into a recession, even before a Fed-induced slowdown. The bond market recently started flashing a recession warning, with the inversion of the 2-year Treasury yield going above the 10-year yield . That flipped back to normal Wednesday but the 5-year Treasury yield was still higher than the 30-year yield . The market sees at least 0.25% rate increases at all six of the remaining Fed meetings of the year, with bigger 0.5% rises possible in May and June. Minutes from the Fed's March meeting, which featured the first interest rate hike in more than three years, are out Wednesday afternoon at 2 p.m. ET. Philadelphia Fed President Patrick Harker on Wednesday joined the party of the central bankers warning about inflation and the interest rate hikes needed to control rising prices. He's been on the more hawkish side. While his commentary might not be as surprising as Brainard's and Daly's, Harker's remarks added to the negative sentiment that's gripping the stock market for the second straight session. The S & P 500 on Wednesday fell more than 1% and the Nasdaq fell more than 2%. Both indexes are heavily weighed in tech stocks, which stand to suffer the most as the Fed moves rates higher. "This downturn is going to separate the wheat from the chaff. I want to be in the wheat by the time this is over," Cramer said, adding that any mini relief rallies should be looked at as selling opportunities. In Wednesday's "Morning Meeting" for the Club and in his morning note , Cramer pointed to an October 2018, when the Fed signaled that they wanted to raise rates in lockstep fashion. Using that as our analog, the high-multiple tech were hit the hardest from October 2018 to the Christmas Eve bottom that year. "The high-flying Nasdaq stocks were the ones that were cut, sometimes in half," he recalled. Looking at the prices now, he said that "they may be overdoing it at this point, but I don't want to buy them." In a preview of Thursday's "Monthly Meeting" for the Club, Cramer said, "I'm not going to be positive. I'm going to be very regretful as a matter of fact." "I was hoping for a little more bullish scenario," he added. "But I'm very conservative here." We wrote a caveat into our big Wednesday morning story on our Fed-driven trading moves, but it's worth repeating: We're not making a sell everything call. We're simply trimming a handful of tech and economically sensitive positions as we have grown more conservative about the market. This view is best quantified by our cash position, which is at the higher end of our historic levels, currently hovering at roughly 14%. That, of course, also means that we are still about 86% invested in the market. (Jim Cramer's Charitable Trust is long AMZN, MRVL, MSFT, and F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Jim Cramer says he's 'aggressively' paring back on tech stocks

Squawk on the Street

Jim Cramer said Wednesday he's turned "very conservative" on the stock market because the Federal Reserve just changed the game.

"I think people should be paring back," Cramer said on CNBC, less than 24 hours after two of the Fed's biggest proponents of easy monetary policy telegraphed shifts in their thinking and talked about taking much tougher action to fight spiking inflation. Cramer said he's been following his own advice, paring aggressively — "maybe the most aggressively for the Club in a decade."