CNBC’s Jim Cramer on Thursday explained four different schools of thought in examining the mixed messages they took from Wednesday’s Federal Reserve meeting. While the Fed chose not to raise interest rates in the near term, it hinted at more increases later this year.
Cramer noted that while investors have had some time to process the implications of the Fed’s meeting, they are now eager to put their money to work.
“They have their reasons, or maybe they even make up their reasons, and today, the purchases, well, let’s just say they were made with reckless abandon,” he said. “I say that because again, the animal spirits control the buyers and they might as well make up a story to buy any stock they want.”
Cramer noted that the first camp of buyers believes the Fed’s bark is worse than its bite, and that they don’t think it will end up raising interest rates to the point of recession.
These buyers, according to Cramer, invest in industrial companies that are doing well in a busy economy. Industry is necessary for a multitude of businesses, from road construction to oil drilling to building data centers and semiconductor foundries needed for artificial intelligence.
The other camp believes the exact opposite. To them, the Fed’s move suggests it will continue to tighten until it forces the economy into a recession. Cramer believes these buyers would be wise to invest in Big Pharma because the industry is “more or less recession-proof”.
Cramer cited Eli Lilly, which is developing two big-ticket products — Majourna, which is used for diabetes and weight loss and has already been taken off label, and a new Alzheimer’s treatment. He also highlighted Johnson & Johnson, which is in the midst of litigation over claims that its talcum-based baby powder causes cancer, but still has a thriving medical device business that is doing particularly well because of its backlog of non-urgent post-Covid ear surgeries.
The third camp, Cramer said, consists of those with “FOMO,” or fear of missing out, who are excited about the fast-casual restaurant chain Cava and feel it just had one of the most successful initial public offerings of all time.
The fourth camp consists of money managers who have been short this market so far and now realize they made a mistake.
“When you put these four, often conflicting, groups of buyers together, you can get a fantastic review across the board like we had today,” Cramer said. “In the end, maybe only one camp can be right, but in the meantime, while bets are being made, almost every type of stock is going higher.”